§ Order for Second Reading read.
§ 3.48 p.m.
§ The Joint Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. Arthur Skeffington)
I beg to move, That the Bill be now read a Second time.
It has been my fortune for five years to be associated with rather massive Bills whose length has been equalled only by their complexity, but this Session I have had rather greater fortune in that it has been my task to introduce several short but modest, and I hope equally useful, Bills. I now bring forward this Bill, which is, in that category. I believe that it will commend itself to the whole House since its main purpose is to save ratepayers' money and to enable local councils to work much more effectively by being able to work in co-operation. [Interruption.]
§ Mr. Skeffington
This is not the first time that a Bill of this type has been before the House. A similar measure was introduced two years ago by my hon. Friend the Member for Bethnal Green (Mr. Hilton), who, I am glad to see, is here today. On that occasion the House failed to reach a decision largely, I think, because there was some misunderstanding about some parts of the Bill.
I recall in our debates then, apart from the general warm support from hon. Members on this side of the House, that the Bill met with the warm approval of the hon. Member for Honiton (Mr. Emery) who, I am glad to see, is also here. I should begin by saying that the Bill is wanted by the local authority associations, all of them having joined in a communication which we received in July asking for legislation to be introduced as soon as possible.
In May, 1967, the Government produced a White Paper on Public Purchas- 42 ing and Industrial Efficiency. This was a result of a study set in motion by the Government, by which it was hoped to lay down general principles whereby public authorities could make considerable economies on purchases, promote greater industrial efficiency and achieve a reduction in the vast numbers of varieties of goods or services. This would be very much easier for all concerned, and, as a result of greater standardisation, would improve the quality of the goods and materials and lead to better value for money.
After the White Paper, the Government undertook to hold discussions mostly with the public industries and local authorities and the Minister of Housing invited the local authority associations and the Greater London Council, which has always had a great interest in this question, to join with the appropriate Government Departments and review the whole matter and produce practical recommendations.
The committee met under the able chairmanship of Mr. A. L. Burton, a former Lord Mayor of the City of Westminster, and it produced an admirable and penetrating report in October of last year. I am sure that hon. Members will have read it. I would like to take this opportunity of thanking Mr. Burton and all his colleagues for the first-class job they did in a somewhat difficult field, for the speed at which they operated and the helpful and constructive recommendations which were made. The report of the joint review body, as it is called, for local authority purchasing, made a number of recommendations, two of which I must raise. The first was that the Government should set up a national advisory body to promote more efficient purchasing, and the second was that there should be early legislation enabling local authorities to co-operate in bulk purchasing.
The matter was considered by the Government and the local authority associations who have accepted the recommendations. This is one of the reasons why the Bill is now before us. The local authority view was very emphatically that the statutory power enabling local authorities to do this work was essential before we could have a useful or effective national advisory body.
43 This is one reason why the Bill has come forward, backed by this impressive report and the unanimous approval of the local authorities. I will not now canvass the obvious and desirable savings that can be effected by larger purchasing. As the review body report points out, savings can be achieved not only by purchasing in bulk but as a result of purchasing by those who are specialists. That is almost equally important.
There are examples in commerce and other areas of industrial life. It would be unnecessary for me to inflict such examples on the House, but it is worth while to refer to a few recent examples mentioned by the review body. In one case mentioned on page 4, a county borough purchasing organisation sponsored an inquiry into its fuel policy with the ultimate result that it was able to save £30,000 a year.
Another example, on page 5, to do with furniture, secured overall reductions of 23 per cent., while a further example about printing shows how, through the help of specialists, a local authority was able to get a reduction of 40 per cent. Hon. Gentlemen can no doubt give other examples. I could myself. I was for many years a member of the London County Council, which used to purchase on behalf of the London boroughs. The G.L.C. still does this, and with ever-increasing volume of business. I gave the figures on the last occasion and they were considerable.
The Bill enables local authorities to do four things, clearly expressed in Clause 1. It enables them and other public bodies to co-operate in purchasing goods and services. It allows a local authority to purchase on behalf of these other "public" bodies which I shall refer to presently. This happens now when a county council purchases on behalf of a number of district councils, with considerable savings. However, these authorities can do that only by virtue of their own legislation. The G.L.C. does it through the 1963 Act, passed by a previous Administration and carrying on what had been the practice of the L.C.C. When an authority does not have its own Act, it may not undertake any action for which there is no special or general provision. The doctrine of ultra vires will apply.
44 Certainly, anything which is done by a local authority which is not covered in some way by legislation exposes it to scrutiny by the district auditor or in some other way. The result is that a considerable amount of co-operation which could flourish does not flourish at the moment because of these difficulties.
The first thing that the Bill does is to enable the local authority, at its discretion—there is no question of forcing a local authority to do this; it is the choice of the local authority—to use this form of co-operation and to purchase goods or material for another body specified in the Bill—either another public authority or another public body which I shall define in a moment.
The second thing which the Bill does, in Clause 1, is to enable an authority to provide another with professional or technical services. This cannot normally be done unless legal power has provided for it. The sort of obvious case—although there may be many examples—in which the greatest gain will arise is that of management techniques. We all remember the great innovation by the Borough of Coventry, 16 or 17 years ago, when that city asked for an investigation to be made by a Government team, and enormous savings resulted.
Many of the larger authorities maintain a special management unit to which every department is subject, whereby they can see that the department functions most efficiently by using the most up-to-date techniques and machinery and by keeping in touch with the best commercial or adminstrative practice.
The larger units obviously do this, but small rural or even urban district councils certainly would not have a permanent unit of this kind. Although I know that some of them have had ad hoc investigations, this really is not as useful as being able to have the advice of a neighbouring authority if both sides want it—I emphasise that—so that this expert specialist service can be available to the smaller authority.
Sometimes this will not necessarily result in a massive economic saving, although we know from the figures that this does happen, but it often results in far better understanding between the authority and members of the public because of the arrangements which can be 45 made by means of modern techniques even in dealing with complaints and with difficulties which may arise.
I warn: to emphasise the importance of this aspect of the Bill by putting on record one other fact. About two years ago, in a report by the National Board for Prices and Incomes, attention was drawn to the fact that in some sections of local authority managed labour the productivity was very low, as indeed was the remuneration, and as a result, I am glad to say, both sides—the local authorities as employers and the trade unionists—got together to improve productivity and remuneration. Following these work studies, about 900 schemes covering about 50,000 workers have been introduced and there has been an increase in productivity and in remuneration.
Having paid tribute to both sides—the local authorites and the employees—may I say that I realise that 50,000 workers represents a small proportion of 700,000 manual workers in local government. But without becoming involved in the subject of recent industrial disputes, I should like to express my view that if there had been this sort of work study in some areas we might have avoided the disputes which inconvenienced a large number of Londoners a few weeks ago. This Bill will enable the use of expert services in this field and wherever else it may be appropriate.
The third way in which Clause 1 can help is in allowing the use of any vehicle or plant or other apparatus by another authority. A great deal of this apparatus is expensive. Earth-moving equipment is one example, and there are many others. It is obviously to the advantage of the greater authority as well as the smaller if it is possible for this plant to be shared. A most obvious example is in the use of technical apparatus like the computer.
I do not want to give the impression that nothing has been done in this respect. In fact, it is very encouraging to report that, thanks to the organisation of local authorities themselves, namely, the Local Authorities Management Services and Computer Committee, there are nearly 240 computers in the local authority service. Although I believe that occasionally some authorities have been able to share their computers with others, they may 46 well have been at risk in doing so as the law now stands.
It is a fact that with this kind of equipment, as with so many other things, the larger and more effective computer is the more expensive. It is the one that gets through a task quicker and, as we all know from our experience, it is often the one where the machine has time to spare. This is again an example of the way in which the Bill can help and carry on the very good work which the authorities have done themselves.
§ Mr. Eric Lubbock (Orpington)
Can the hon. Gentleman say whether there is provision for one local authority which has developed programmes for use in a particular sphere of activity to be able to sell those programmes to another authority? Will it be possible, for instance, if the G.L.C. has developed a programme, for that authority to sell it, say, to the Kent County Council?
§ Mr. Skeffington
The matter is entirely one to be arranged between one authority and another. From our discussions we imagine that the terms will normally cover the cost of providing replacements, and so on. It will certainly be possible for this to be done if an authority so desires it. Indeed, I very much hope that this will be the case.
The fourth provision, in Clause 1(1)(d), will enable one authority to carry out maintenance work on the land or buildings of another authority. In this case the smaller authority may be able to help the larger, instead of the other way round. A very simple example will make this clear. Nearly all local authorities have a maintenance unit for their buildings, and it is very sensible that they should. It is quick, effective and cheap. It may be that there are buildings belonging to a county authority which require attention. The county depot may be 40 or 50 miles away. Nothing could be more simple and more a saving of time than to allow the district council's maintenance unit to do the work, if the county council so desired. That is the sort of case which paragraph (d) will cover.
I come now to subsection (4) of Clause 1 and the reference to "public body". It will be seen that the expression "public-body" includes any local authority—that is the purpose of the Bill—but it includes 47 also, among others, a parish council. A parish council may receive help though not give it. Obviously, a parish council would not be able to give the kind of help about which we are speaking now, but the Bill makes clear that a parish council may receive help under these provisions.
Now, reference to other public bodies. There are a number of bodies performing public functions today which do not fall strictly within the definition of a local authority. Obvious examples are a police committee or a hospital board. Again, if the parties desire—it is entirely for them—it will be possible for arrangements to be made between them if the Minister certifies by order that the body concerned is such a public body, that is, a body performing public functions. The House will see the importance of the definition in that respect. If the Minister makes an order and the House approves—it will be subject to annulment—it will be possible for help to be given to the other body.
That was the simplest way of expressing the matter. One could have had a very long definition, but in that way one might well have excluded some body which ought to have been covered. As the matter stands, however, the Minister must be satisfied that it is a public body, that it is performing public functions, and, if he is so satisfied and the House does not object to the order, the help can be given. I suggest that that is a reasonable safeguard and a sensible way of doing it.
Some authorities have these powers already. Fifteen county councils have powers to supply goods and materials to borough or district councils within their area—the first such private Act was passed as long ago as 1936—and 16 authorities have power to share vehicles and certain other equipment. Last Session, powers of that nature were given to the Lancashire and Cheshire County Councils. I have already referred to the Greater London Council and the identical powers given to it under the 1963 Act.
To set at rest any fears which may be entertained, the sort of fears which, unfortunately, prevented our reaching a decision when the question was last before us, I should mention two things which the Bill does not do. It does not 48 allow an authority to do new building. Clause l(l)(d) refers to maintenance. It will not be possible for a local authority building department, or, to take the example in its worst form from the Opposition's point of view, the form which might alarm some people, a direct labour department, to start building new housing or for a hospital board, or something of that kind.
I dare say that some of my hon. Friends will regret that that is so, but what we are doing at this stage in this minor Measure is what the local authorities wanted, what was recommended, and what the study group thought would be wise.
§ Mr. Peter Emery (Honiton)
While on that point, the Minister might shorten some speeches if he told us what the view is about extensions, which is referred to in subsection (4). Obviously, the word "extensions" could be open to wide interpretation. Some people might well say that it would cover quite major building. I hope that that is not the Minister's intention.
§ Mr. Skeffington
Perhaps the hon. Gentleman would read the report in this connection. I confirm that what is intended by extensions is the sort of thing which may now be done within the competence of the smaller maintenance units. It is certainly not new building in the usually accepted sense of the term. We shall make that clear in the guidance which we shall issue in due course to the authorities concerned. I hope that that will set the hon. Gentleman's fears at rest.
§ Mr. W. S. Hilton (Bethnal Green)
Will my hon. Friend make clear also, in view of the apprehension felt by some hon. Members opposite, that the reference to maintenance in the Bill is exactly as it appeared in the London Government Act, 1963, passed by a Conservative Administration?
§ Mr. Skeffington
I am glad that my hon. Friend has emphasised that. I have already said that the powers of the Greater London Council are precisely the same in this and in most other respects as in the Bill.
To allay any other fears, I should add that this is not a greater charter for the extension of municipal trading. I should not mind making the case for that again 49 on an appropriate Measure, but all that the present Bill does is to enable services which local authorities are now empowered to provide to be shared among the categories of recipient which I have mentioned.
Clause 2 prevents anything in the Bill prejudicing powers which local authorities already have. There is nothing here which is in any way in conflict with them, and that should be stated. Subsection (2) enables an authority to come to the Minister and ask him, by order, to repeal or amend any of its own Acts where they have become either unnecessary or repetitive as a result of this Bill. It is purely a tidying-up provision as is usual in these circumstances.
I hope that I have not wearied the House with too much detail. This is a modest though useful Measure. It follows the recommendations of a specialist committee. It is urgently required by the local authorities, and I hope that on this occasion its purpose will be accepted and the Bill will be given a Second Reading.
§ 4.17 p.m.
§ Mr. Peter Walker (Worcester)
I thank the Parliamentary Secretary for his explanation of the Bill. Perhaps I may congratulate his hon. Friend the Member for Bethnal Green (Mr. Hilton) on seeing before the House a Bill which basically follows his original conception, his purpose now having been adopted by the Government. Incidentally, he is fortunate in having it before the House on its own and not followed by a blood-sports Bill such as encouraged on the previous Occasion a certain amount of oratory which might otherwise not have been displayed.
The Parliamentary Secretary has endeavoured to make clear two of the non-objects of the Bill. First, it is not to extend municipal trading. Secondly, it is not to allow an extension of activities by direct works departments in new building. We welcome that assurance, and we shall move Amendments in Committee to give what we regard as necessary greater certainty on that point. I associate myself with the hon. Gentleman's remarks in thanking Mr. Burton, the chairman of the joint review body, and those who worked with him in preparing a very interesting and important report.
50 Undoubtedly, it is necessary today to do everything possible to improve the efficiency of purchasing by local authorities and the utilisation of both their manpower and their equipment and goods. When we realise that about £8 a week for every family of four is now administered and spent by local authorities, we recognise the enormous scope for improving efficiency in this sphere.
I must express slight concern here. If a number of local authorities join together in future to purchase goods in greater bulk, I hope that they will acquire the skilled management to do that purchasing. It is one thing to decide that there is an advantage in buying a large volume of goods, perhaps making one or two inquiries and putting in a large order, thinking that one has made a saving, but one may discover that one has warehouses full of goods of perhaps inferior quality at nothing like the competitive prices that could be obtained.
In industry, the buyers are highly paid and skilled. Much of the difference between a profitable industry and one that makes losses is the skill of the buying. I am a little concerned that there might be a tendency for officials without a great deal of knowledge, experience and expertise in purchasing suddenly to band together and purchase without the skill that both sides of the House would like to see. I hope that everything will be done to bring into local government a much greater skill in purchasing, with the recruitment of the correct management that will be needed if the powers in the Bill are to be properly used.
The other factor which causes a degree of concern is the importance of seeing that for the activities enabled by the Bill the proper overheads are allocated for handling the goods. One of the difficulties is that money obtained at relatively low rates of interest due to the power of a major local authority may well be used with less skill than where a proper market rate of interest had to be paid. Likewise, I hope that the cost of warehousing, storing and distribution will be properly assessed by those carrying out the activities that are allowed. The cost of storage can be considerable.
One part of the Bill which the Minister did not mention—I do not criticise him 51 for this—was the provision in Clause 1 that local authorities…may purchase and store any goods or materials which in their opinion they may require for the purposes of paragraph (a) of this subsection.That gives a power to buy in for the future, and I hope that we shall not see too many local authorities engaging in a speculative assessment of the future trend in a market, and then perhaps finding that the market goes the other way and that it has purchased at too high a price. A careful watch will have to be kept on the situation here.
The question of public bodies, naturally, causes a degree of suspicion on this side of the House. The Minister said that he will explain to us the powers he will have of deciding that a particular authority will be described as a public body for the purposes of the Act by means of a Statutory Instrument. We do not consider that that is good enough. For example, if the Minister decided that the Coal Board was a public body for a particular purpose, and listed it in a Statutory Instrument as an appropriate public body under the Bill, I think I am right in saying that the local authorities concerned could thereafter enter into agreements of any nature with the board, provided that they complied with the wording of the Bill.
I quote the Coal Board because it has a chain of builders' merchants, and there could be a situation where the board is described as an appropriate public body for a purpose other than its builders' merchants side. For that purpose, both sides of the House would agree with what was happening. But the fact that it was described as a public body would enable it to join with local authorities in joint purchasing of building materials thereafter sold through its building materials subsidiaries to the public, and there would be an extension of unfair trade.
Therefore, I would like to move in Committee that the Minister may have the power to approve of public bodies coming into such agreements under a Statutory Instrument, but for a specific type of agreement, so that we know the nature of trading which would thereafter take place with that public body. We 52 shall move an Amendment to that effect, because it is of considerable importance.
§ Mr. A. P. Costain (Folkestone and Hythe)
Is my hon. Friend also aware that the Coal Board is among the biggest brick manufacturers in the country? Will not an Amendment to cover bricks be even more important?
§ Mr. Walker
We must know the nature of the bodies getting together, not just list them, and thereafter having them do whatever they like. This will be a very important Amendment.
Under the Transport Act, 1968, of which I have a reasonable knowledge, the passenger transport authorities have the power to run garages. We would be very unhappy if a passenger transport authority was described as a public body under the Bill and thereafter took advantage of bulk purchasing agreements of vehicles which it then retailed to the public through its garage outlets, if it possessed any. We would want considerably to tighten up Clause 1.
We do not like the use of the word "extensions" in Clause 1(4). I concede that that was the wording of Conservative legislation, but there is always scope for improving legislation, even that passed by Conservative Governments. We shall, therefore, seek to define "extensions" in the Bill, so that the word could not result in a substantial building programme taking place. We would also like to see a formal direction on the nature of tendering to take place under the agreements. We would like the right of tendering to be incorporated in the processes.
Our view on this side of the House is very simple. We are very much in favour of trying to improve the purchasing skill of local authorities. We recognise the absurdity of perhaps two or three local authorities in close geographical proximity separately purchasing items that could be bought at reduced prices if bought jointly by all three. We recognise the spirit in which the Parliamentary Secretary introduced the Bill, and I urge my hon. Friends to support it on Second Reading. But we consider the Amendments we shall move in Committee, putting a proper restriction on the wrong use of the Bill, are vital.
53 It will be in the light of the Government's attitude to our Amendments that we shall decide our attitude on Third Reading. If those Amendments can be accepted, the Bill may well assist the efficiency of local government.
§ 4.28 p.m.
§ Mr. W. S. Hilton (Bethnal Green)
I must express agreement—to my surprise—with almost everything that the hon. Member for Worcester (Mr. Peter Walker) has said about the Bill. Something he said has also lightened the darkness in which I have been for the past two years, since our debates in 1967 on my Bill. I could never understand some of the comments made then, but it now seems clear to me that some hon. Members opposite thought they were speaking on the blood sports Bill when they were making a contribution on local government goods and services. I was to same extent cheered by the fact that at that time there was all-party support, from the hon. Member for Honiton (Mr. Emery) and the hon. Member for Orpington (Mr. Lubbock), but I am still surprised, even now, by the opposition of some hon. Members opposite.
I took the same view then of the Bill as my hon. Friend the Minister did today. What I tried to do with my Bill was to extend to all local authorities the excellent provisions in the London Government Act, 1963. Opposition was originally expressed to that Act in the House on other grounds, but I believe that in relation to these provisions and a number of others the most progressive local government thinking of that time was enshrined in that Conservative Act.
It seemed to me that the whole debate in 1967 was fouled by the idea that we were trying to extend public enterprise at the expense of private enterprise—even if this was not always openly expressed. I could not see how extending the provisions of a Conservative Government Measure throughout the country could leave one open to the accusations of doing that, but at least some hon. Members opposite made those accusations. It was also highly significant that not one hon. Gentleman opposite who spoke in that interminable debate mentioned the London Government Act, 1963, or why they had changed their mind or even if they had changed their opinions of these Conservative provisions.
54 Another pertinent point—the Minister referred to this—is that nearly all the associations of local authorities supported the Measure. I wrote to them personally and, as the hon. Member for Worcester admits, they expressed the belief that it was desirable to introduce such a Bill. However, on the previous occasion the matter was considered this support was discounted because, it was said, local authorities had vested interests and would obviously follow them by support for the Bill.
If hon. Gentlemen opposite had been able to tell me on that occasion, however, that the local authority associations opposed the Measure, that would have been a fair enough reason to them for rejecting the Bill. I therefore still feel rather bewildered by the debate which took place on that occasion, although I have been heartened by the words of the hon. Member for Worcester today.
I begin with the proposition that if we can bring about economies from the use of co-ordinated purchasing and other services the result will be good for many sectors, including the private building industry, local authorities and the economy as a whole. At present, local authority purchasing is running at about £3,000 million a year. If we are able to achieve only a 5 per cent. saving on that total sum, the saving for local authorities would be £150 million. I am not saying that this is likely to emerge immediately, because this is, after all, permissive legislation. Local authorities can use it if they wish and my guess is that many of them may not have the initiative to make full use of it.
It was originally estimated by me that a saving of £150 million might be achieved by a 5 per cent. saving through bulk purchasing. On the other hand, the hon. Member for Honiton said, in what was undoubtedly one of the finest speeches made when we discussed the earlier Bill—it was a superb speech because of his expertise and because, in any event, he supported the Bill—that from his knowledge of educational expenditure savings of between 15 and 30 per cent. could be achieved on certain items. The possible savings are, therefore, much greater than I have prognosticated.
We should also remember that in almost every rate precept, by far the larger single item demanded from the 55 public in supporting the rates is education. If we can make the sort of savings mentioned by the hon. Member for Honi-ton—savings that have been achieved already by some local authorities—we will be doing a great deal for ratepayers and local authorities alike.
The Minister suggested that many small local authorities are badly in need of expert purchasing advice and could benefit from the Bill. Many hon. Members have experience of local authorities and some of them extremely small authorities. They know that some of the smallest local authorities cannot even pay a full time town clerk or treasurer. It is highly unlikely, therefore, that such local authorities are able to afford specialist purchasing officers who have the techniques required for their task and the ability to put them into practice. But if the Bill is agreed in principle, as it seems to be, these small local authorities will have the benefit of the expertise that is available to the larger local authorities.
I take a lesson in this context from another Conservative county council. The 1963 London Government Act was introduced by the Conservatives and set out the principles laid down in this Measure. However one local authority which has been practising them for a long time is Kent County Council, perhaps the finest example of its type in the country. This council has reached the objectives which we are setting for small local authorities. This is the objective of trying to help the smaller local authority with its purchasing methods. Mr. G. Carney, the county supplies officer for Kent, made the point in a speech on "Purchasing and Supply in a County Administration". He summed up the benefits of bulk purchasing by saying:If proof is required of the financial benefit provided by such arrangements, it surely lies in the fact that the smallest Rural District Council in Kent has been supplied with its fuel oil at a price which was only marginally greater than that paid by the largest local government buying organisation in the country.Although he was referring to only one item, it proves the general opportunities that will be made available to small local authorities if the Bill becomes law.
There are hon. Members on both sides who represent the building industry. In the newspapers today there appear what 56 I consider to be some rather panic-stricken announcements about what the Bill might do to the industry. The first point of reassurance to make—this was made when we were discussing the earlier Measure—is that no new building will be allowed. This point was emphasised when we discussed the matter earlier to reassure people that we were not attempting to attack the private building industry. Indeed, many organisations allied to the building industry have said that if we could achieve organisation of demand through public authorities we could reduce the price of building components. The economic development committees for both building and civil engineering have said that it would be possible only through public authorities to organise demand.
A local authority has its pool of rate funds. It knows what it wants to do and it is possible for it to take decisions on specifications and organise demand. But the same cannot be done in the private field with individual owner-occupiers or other small purchasers. The E.D.C.s have pointed out, therefore, that there is almost no possibility of organising private demand. If we are to achieve the benefits of large-scale production, they would have to come about through the organisation of public demand. The E.D.C. committee for building joinery pointed out that if we could have large-scale production of, say, manufactured doors, a saving of 8 per cent. could be achieved. Large-scale manufacture of stairs could result in a saving of 13 per cent. The E.D.C. for the ceramic sanitary wear sector said that great savings could be made if standardised designs were adopted in the manufacture of certain items.
It is worth remembering here that Britain exports a great deal of its building materials production, a point which was made when we discussed the earlier Bill. A great deal of our ceramic sanitary wear is exported. If we could achieve standardisation of design, that would lead to lower costs, so that not only the private building industry but our exports would benefit. The private industry would benefit because of lower home prices. I therefore cannot see why there should be any objection to this step on the part of tho se interested in the building industry.
57 Some building suppliers have expressed fears about the measure, partly I suspect because that they have not read the Bill carefully. But it would actually help them. The standardisation of designs would mean the suppliers not needing the storage facilities which they have now and their financial outlay on building materials would be lessened. They would benefit from greater runs of production that might arise from a co-ordination of demand in the public sector.
What is the economic situation in which we are discussing the Bill. The general trend in industry and commerce today is in the creation of big corporations. Already, we have seen the emergence of some near giants in this country, and internationally there are industrial corporations whose total annual income is greater than the national exchequer incomes of many countries. We have to ask ourselves why these developments are taking place in private industry. This growth is not occurring on the same principle as Topsy grew. It occurs because these corporations feel that there is some benefit to be obtained. I believe that the co-ordination of service and purchasing activities is one of the major reasons for private business taking the initiative and making sure that they benefit from "bigness".
We are told constantly from the benches opposite that we ought to take a leaf out of the book of private business, benefit from some of the lessons produced, and utilise them in public bodies, local authorities and in government. We are told that, if we elect more businessmen to the House and to the local authorities, that is all that we need to ensure that all the problems facing them will be solved. I do not completely disagree with that contention. I am on a number of public authorities such as the hospital boards, where I have seen people with business experience making a very effective contribution.
I am prepared to accept that view, therefore. But what surprises me is that those in this House who advance the argument that there are lessons to be learned! from private business then have the effrontery to come here and deny our local authorities the right to profit from those lessons. That is what happened on the previous occasion when the other Bill was before the House.
58 In my opinion, there was a strong prejudice against local authorities having these advantages, yet those who wanted to express opposition to the Bill had only two alternatives open to them. The first was to admit that they were prejudiced and did not wish local authorities to have the advantages. The second was to deny that any advantages existed. Most Conservative hon. Members who opposed the Measure chose the Luddite view. Having extolled private business on other occasions, they occupied themselves mightily during the previous debate in saying that the advantages did not exist and that the private business world had produced no lessons to show that the co-ordination of supplies and services meant economies.
As a result, we had what I regarded as the most entertaining spectacle of 1967—hon. Members opposite refuting their own economic arguments and denying that they had any validity. I hope that the more enlightened atmosphere engendered today by the speech of the hon. Member for Worcester will result in the House looking more favourably on a Measure which, in all sincerity, is designed to help local authorities to help themselves, the industries with which they are connected, and the economy of the country in general.
§ 4.45 p.m.
§ Mr. Oscar Murton (Poole)
It would be churlish if hon. Members on both sides did not at least compliment the hon. Member for Bethnal Green (Mr. Hilton) on the fact that his Bill of two years ago has now been lifted in its entirety by his own Treasury Bench. Whether he lifted it in the first place with the help of his Government, I do not know, but it is striking that it arrives unexpurgated and in its original form. That makes it easier to discuss it. On the last occasion, a number of hares were chased, but not all those hon. Members who contributed to that debate were concerned solely with hares. They were very much concerned also with the problems of local government.
I think that the local authorities are most concerned about the first recommendation of the Joint Review Body on Local Authority Purchasing, set up in 1967. It states:The Government should give priority to introducing legislation which would allow local 59 authorities to supply goods one to another and to contract, purchase and store for that purpose.I suggest that that recommendation is narrow in its effect and very different in its intention from the hon. Gentleman's original Bill which the Government have now brought before the House.
Once again, I join issue with the Parliamentary Secretary. I asked previously whether these powers are not in practice already in existence and whether they have to be enshrined in a special Act of Parliament. I know that certain local authorities have promoted private Bills on the point, but I wonder to what extent in practice the rule of ultra vires has had an adverse effect on co-operation between neighbouring local authorities.
The Parliamentary Secretary specifically mentioned computers. I crossed swords with him on the subject two years ago. I will not refer to individual local authorities, but I know of a number who very happily have co-operated in sharing computer time, and a number have been able to let out their services to public bodies which are related specifically to local government.
Can the hon. Gentleman quote a single case where a local authority has been challenged? I suggest that he cannot. A district auditor can only challenge unlawful expenditure. If a local authority sells its computer time or any other service at a profit, there can be no challenge. The only remedy open to the district auditor is that of surcharge, and one cannot very well surcharge a profit.
§ Mr. Skeffington
The difficulty is that it is a rule in practice and has been decided in innumerable cases that, if a local authority provides services other than for the inhabitants of the locality, it may be ultra vires. It seems desirable to remove the uncertainty. At the time of the annual audit, any elector can go to the district auditor and make the necessary challenge. It is not making for any basis of harmony if there is this uncertainty in the background.
§ Mr. Murton
I am grateful for that explanation, but I wonder whether an objector would get anywhere. Provided that the service was not made available at a loss, I do not see that harm could be done.
§ Mr. David Weitzman (Stoke Newington and Hackney, North)
It would be open to any layman to challenge a council if it performed an act which was ultra vires.
§ Mr. Murton
As I understand the situation, it is normally the layman who does it. There are some who are very active in this respect.
Why is the Bill being produced now? The original Bill anticipated the publication of the Reports of the Royal Commissions on Local Government for England and Scotland. Apparently, in promoting the present Bill, the Government have decided to ignore the recommendations contained in those reports. If, relating to England, the main provisions of the Redcliffe-Maud Report are accepted—we do not know whether they will or will not be, but the odds are that they will basically be accepted—why should a Bill be enacted at this stage aimed at widening the powers of local authorities to supply goods and services to other local government units when unitary authorities or similar bodies numbering about 60 will replace units numbering something in excess of 1,000? If we exercise patience, I think that this matter will resolve itself without the need for special legislation.
If the Minister replies that the Bill should be taken now because of the delay implicit in the final implementation of the report on the reform of local government, then one could argue the other way and ask why the recommendations of the Commissioners on parliamentary boundaries should have been postponed? Surely this is an important point.
Another matter that I must make quite clear is that I understand the Redcliffe-Maud Report, as such, to recommend that the ultra vires powers should be removed. If that is the case, how is it that we are faced with this Bill at this particular time? Could it be that the Government have not got any other Bill to fill an awkward lacuna, if that is the correct word?
Another important point which concerns me is that the joint review body apparently comprised representatives from only local authority associations, the Greater London Council and a number of Government Departments. I should like to be assured that the views 61 and experience of both industry and wholesale merchants was considered at that time because the Bill could affect their future, despite the assurances that we have been given. No one desires to prevent local authorities improving their efficiency, because the more efficient a local government unit, so will there be less burden on the ratepayers. That is something for which we pray at all times. For that reason, I do not oppose the specific principle contained in the Bill.
There has been much concern manifested by industry and by trade because the provisions of the Bill are much wider than comparable clauses in private legislation concerning certain local authorities. Under the Bill, the purpose for which goods might be supplied or services given is not confined to the functions and duties of any of the bodies concerned. There can be no indication how far Ministers may go in the prescription of a "public body" for the purposes of the Bill.
In this connection, the words in the latter part of Clause 1,appearing … to be exercising functions of a public nature…are very wide indeed. Under the usual form of the corresponding provisions in local Acts the powers are usually confined to local authorities within the county or other authorities having a definite connection with the promoting body.
§ Mr. Hilton
Following the Conservative Government's London Government Act, 1963, would the hon. Gentleman be prepared to accept that the authorities referred to there as suitable public authorities include hospital boards, national assistance centres, welfare organisations and even the British Postgraduate Medical School?
§ Mr. Murton
I do not know that I would. What I think is meant by "public bodies" is what local authority associations had in mind in this respect, namely, local water undertakings and similar bodies having close connections with local government. To that extent I should not disagree. But I am alarmed that it might become wider.
My trouble is that I do not trust a Labour Government. That is not a unique comment at present. After reading the provisions of the notorious Trans- 62 port Act and knowing what can be done by British Railways or the other transport undertakings—the wide diversification of trading activities which can take place—naturally I am concerned that a Minister may one day come to this House and produce a statutory instrument enabling local authorities to provide goods and services for a nationalised industry.
§ Mr. J. T. Price (Westhoughton) rose—
§ Mr. Murton
I will give way when I have finished this argument.
I know that there has been alarm and despondency in the country and in the Press this morning about the possibility of a large buying monopoly being created. It may not go as far as that, but we could have local authorities who, under certain conditions are able to obtain a refund of selective employment tax, actually competing, for instance, with builders' merchants, contractors' plant hirers or meat traders who have to pay selective employment tax.
§ Mr. J. T. Price
The hon. Gentleman has introduced a note into the debate which rather surprises me, particularly when he began to rake over past controversies, namely, the historical background of the railways. I draw his attention and that of the House to the fact that when the railways became nationalised they inherited a system which included railway workshops. Those workshops were set up, if the hon. Gentleman reads the history of the period, by the companies who owned the railways as a defence mechanism against exploitation by the people supplying goods to the railways in the first place. This may not be directly relevant to the Bill, but if we are to link this with 1967, we should bear in mind that these developments have taken place to protect the public interest against exploitation—
§ Mr. Murton
I thank the hon. Member for Westhoughton (Mr. J. T. Price) for his intervention. He suggested that it was not directly relevant. I agree with him. But I should point out that certain of the railway workshops in past years have been closed down.
63 I want to know whether the Minister can give some assurance to the National Chamber of Trade, which represents all those bodies in private enterprise, about the extensions which might be expected to the Bill, particularly regarding public bodies. I was for a time the secretary of a division of the National Coal Board and I have seen what can happen when such bodies indulge in a large measure of bulk-buying. I understand the policies.
We must obviously do something to rationalise on certain occasions. In this case, there were 123 colliery companies in Northumberland, Durham and Cumberland buying, for instance, their lubricating and fuel oil from many different firms. On the other hand, when a bulk-buying organisation comes into being and many of those firms lose the business that they have had for many years, it can cause serious repercussions.
I have mentioned my experience with the Coal Board. Suppose it is treated as a public body and a local authority cooperates with it in certain matters. To take a simple case, the Coal Board is keen on landscaping its pitheads, or spoil heaps, or bings, depending on what part of the country one is describing. There is a danger that it might upset the horticultural industry by obtaining the services of local authorities' parks departments for this purpose. I am sure that it is not the wish, even of this Government, to interfere in such matters.
As my hon. Friend the Member for Folkestone and Hythe (Mr. Costain) said, brickmaking forms an enormous part of the subsidiary work of collieries, because the clay which comes out in the coal measures is eminently suitable in many cases for making bricks. There could be an extension of this in a nationalised industry where machinery is set up for buying. There could indeed be too close a co-operation with local authorities to the detriment of private enterprise.
I think that the Bill is too widely drawn. My hon. Friend the Member for Worcester (Mr. Peter Walker) has asked for certain safeguards, and I think that these are vital. If one goes back a little in history, one sees the effect of indiscriminate use by local authorities of their powers in relation to bulk purchasing and the storing of materials and components. This provision might result in local 64 authorities stating in their contracts that they themselves should be the nominated suppliers for some or all of the materials and equipment used by firms when carrying out jobs for them.
In a less happier time, the Manchester direct works department specified that that should be done. It specified that the components production factory which it owned in Bessemer Street should be used as a supplier. To my way of thinking that is wrong. I am glad that there has been a change of political control in Manchester, and that those works have been closed. One has to watch that sort of thing.
I think that the House should also be reminded of what the Prices and Incomes Board has said. It has drawn the attention of local authorities to the need to examine, for instance, the relative costs of their architects departments vis-á-vis private architect firms, and even more, to examine the costing of maintenance work carried out by respectively private contractors and direct labour.
It is on this question of maintenance by direct labour that I should like to say a few words. All the evidence proves that local authority direct labour carries out repairs and maintenance less economically than when it is done by contract labour. It is difficult to obtain an absolutely accurate comparison of output as a measure of productivity per man in direct labour and contract labour, but in 1968 the output per operative employed on contract repair and maintenance was about £2,810, while the output per operative employed by local authorities was about £1,710. I suggest that that proves irrefutably that contract labour is by far the most economical.
§ Mr. Murton
I am not speaking on anybody's authority but my own, I am 65 glad to say. I obtained these statistics, and I have no reason to doubt their validity.
§ Mr. Murton
If the hon. Gentleman would like to meet me afterwards, I shall be pleased to give him the information. I do not intend to give it now.
One has to remember that in past years a number of tricky situations have arisen in connection with direct labour. Fortunately, they are all over and done with, but they ring like sad and sorry tales of far off battles, names like Liverpool, Shrewsbury, Bedlington, Merthyr, Salford, Coventry and Glasgow. I am glad that things are changing for the better on a change of local political control.
I should like to issue another word o£warning. I understand that the Comptroller and Auditor General recently commented unfavourably on the failure of hospital authorities to test their direct labour costs in competition. Where this was done, one authority found that direct labour costs were 50 per cent. higher than the costs of outside contractors. That is the sort of thing that the House has to watch.
I know that the hon. Member for Bethnal Green is interested in the Cooperative movement, and in many ways there is a direct analogy here. I know that the Co-operative movement has had a difficult time. It has had to close down Pelaw, one of its main manufacturing centres. I know, too, that a number of societies are in serious difficulty. I believe that that is so with nine of them. If that situation has arisen with such an able and efficient bulk buying movement, it strikes me that one has to move carefully in all these matters.
§ Mr. Hilton
I think that the hon. Gentleman is expecting an interruption by going so widely. The Co-operative movement, which has increased its membership every year, now has 13 million members. It is co-ordinating its efforts, and its share of trade is increasing. Unlike private business firms, none of the societies will ever fail to pay out in full the share capital of its numbers. It will probably pay more.
§ Mr. Murton
I believe that shareholders' investment has fallen to £218 million compared with £249 million in 1957, and that its sales of £510 million to 600 retail societies in 1968 produced a profit of only £2.8 million.
I know that the Parliamentary Secretary will not like my final remarks, but I think that on this question of direct labour there should be an Amendment in Committee to include something on the lines of the old Circular 50/65 which a previous Minister of Housing and Local Government removed. If that Amendment were made, on this question of maintenance of land and buildings there would be some opportunity by means of tendering to weigh the costing between local authority services and those of private enterprise.
I am not out of favour with the main principle of the Bill, but I am worried about the possible extension of it. I hope that when we table Amendments in Committee they will be debated, and even accepted. My hon. Friend the Member for Worcester threatened that if something had not been done to amend the Bill in certain respects by the time it came up for the Third Reading he reserved the right to vote against it. I do not wish to be out of step with my party in this matter. I have grave misgivings about the Bill, and it is only right that I should have voiced them.
§ 5.8 p.m.
§ Mr. David Weitzman (Stoke Newington and Hackney, North)
The reception accorded to the Bill by hon. Gentlemen opposite is very different from that accorded to a similar Measure introduced two years ago, and contrasts sharply with the suspicious criticism in the editorial of today's Daily Telegraph, which I hope some hon. Gentlemen opposite have read. I appreciate that the hon. Member for Honiton (Mr. Emery) has probably converted his hon. Friends to his view, and I welcome that.
My hon. Friend the Member for Bethnal Green (Mr. Hilton) introduced his Bill—now adopted by the Government in precisely the same form—in December, 1967. One of the objections which hon. Gentlemen opposite had to that Bill was that according to them its provisions should not be effected by a Private Member's Bill. That objection at any rate has gone. That Bill failed to 67 get through, not merely because of the opposition to it by hon. Gentlemen opposite but because, as it was dealt with on a Friday afternoon, the Opposition succeeded in ensuring that the Closure was not accepted.
I was interested in the observations of the hon. Member for Poole (Mr. Murton). He talked about the ultra vires doctrine, and apparently could not understand it. I appreciate that if a layman were asked why the Bill was necessary and was told that local authorities could not do some of the things that the Bill provides for he would probably be astonished. Nevertheless, the ultra vires rule precludes cooperation in many instances not only between local authorities themselves, but between them and public bodies. Even if there is doubt in some cases it is essential that such doubt should be removed, because it reveals a basic legal defect which limits the relationship between public authorities.
The hon. Member for Poole will appreciate that that defect has been removed, in the case of the Metropolis and some other cities, by Acts passed by Conservative Governments, and in my submission it is wrong that the advantages that have accrued to those cities as a result should be denied to other local authorities and public bodies.
What are the advantages? My hon. Friend referred to the White Paper published in May, 1967, Public Purchasing and Industrial Efficiency. That White Paper set out the immense advantages to be obtained by central co-ordination of purchases. It referred to the construction work undertaken by the Ministry of Public Building and Works for the civil Departments and the defence services—the buying of many of the requirements of furniture and supplies—the Stationery Office meeting the requirements for stationery, printing and office machinery—the Ministry of Health meeting the requirements in drugs, dressings and certain medical and surgical equipment, for other Government Departments and the Defence services—the Ministry of Defence buying most of the motor vehicles for Government services and petrol, oil and lubricants for a number of Civil Service Departments.
That White Paper—Cmnd. 2391—dealt with buying by the Central Government, 68 but it showed that the total value of purchases made by the rest of the public sector was substantially greater than the purchases of the central Government. It went on to propose that local authorities and the nationalised industries should be invited to co-operate with other public bodies to review the position. The importance of bulk purchasing has been stressed again and again in Labour election manifestoes. It is undoubtedly good business. In the debate on the Bill introduced by my hon. Friend I remember the speech made by the hon. Member for Honiton—the only Opposition Member who spoke in favour of the Bill. He obviously had great practical knowledge of the subject, and he gave examples of the way in which local authorities cut down expenditure considerably by central purchasing and stock control in educational stationery and material. Similar economies could be effected in the building of roads, the upkeep and management of hospitals, in universities, and in the affairs of many public bodies.
The Bill would also permit, in Clause (1)(b), provision by an authority of any administrative, professional or technical services. That would lend itself to the greater use of trained staff and to a great degree of efficiency in trained staff. I read with interest the report of the Joint Review Body on Local Purchasing. That body—and hon. Members opposite should note this in view of their criticisms—included representatives of the Association of Municipal Corporations, the County Councils Association, the Rural District Councils Association and the Greater London Council, as well as representatives of Government Departments.
No note of dissent was indicated in the Report. After studying all the aspects and the advantages to be obtained, it put forward the recommendations that the Ministries concerned and the local authority associations should confer together with a view to setting up at an early date national machinery to co-ordinate the purchasing activities of local authorities and to encourage prompt and more efficient purchasing by local authorities. In view of the remark made by the hon. Member for Poole, I want to refer particularly to the recommendations contained in this report. The one at the forefront was that which he quoted, calling upon the Government to give priority to 69 the introduction of legislation which would allow all local authorities to supply goods one to another and to contract, purchase and store for that purpose.
The hon. Member said that that was a limited recommendation. Surely he does not want to deceive the House on that point. I shall read paragraph 32 in full, in view of what he said. That paragraph says:We have already mentioned that there is no general statutory power to enable one local authority to purchase goods on behalf of another. Thus, except where local Acts give the necessary powers, the ultra vires rule precludes the sort of co-operation which we regard as fundamental to the more effective use of local authority purchasing as a whole. We therefore welcomed the introduction by Mr. W. S. Hilton, M.P., in the 1967–68 Session of Parliament, of his private member's Local Authorities (Goods and Services) Bill, which had government support and which"—I ask the hon. Member to note this—if enacted, would not only have removed the basic legal defect that precludes one local authority from supplying goods to another, but would have authorised a local authority to buy also on behalf of certain other 'public bodies' (which term could have included, for example, police forces and universities). We regret that the Bill did not secure a second reading. We consider that early enactment of similar legislation is essential to local authority purchasing making any significant contribution to achieving the aims of the White Paper. And without such legislation our recommendation for the setting up of a national coordinating organisation will be meaningless.I am glad to see that that essential legislation is now to be enacted.
§ Mr. Murton
I cannot help feeling that all this is straining at a gnat over the question of ultra vires. If I were convinced that local authorities have actually had trouble where they have lent out, for example, computer time, I might be more sympathetic, but I have not been given one concrete example in respect of which a local authority has been challenged. I should be very interested to hear from the hon. and learned Member that there have been such cases.
§ Mr. Weitzman
If the hon. Member would care to consult the reports of the law cases he would find dozens of instances in which local authorities have been held to have acted ultra vires. It is not a new doctrine. His information is quite incorrect. Moreover, he should remember that even if there is doubt about one point it is essential that that doubt should be resolved.
§ Mr. Skeffington
I am grateful to both the hon. Member and to my hon. and learned Friend. The very fact that certain authorities have sought powers for one purpose or another—bulk purchasing of goods and materials, or sharing equipment—and that the House has given them the powers, is convincing proof that the law is at least uncertain in this matter. Otherwise, the House would not have given the powers in question.
§ Mr. Weitzman
I am obliged to my hon. Friend for what he has said. If anybody is straining at a gnat it is the hon. Member for Poole.
My hon. Friend has said that the Bill is permissive. A local authority is not compelled to carry out its provisions. I read with interest an article by the hon. Member for Guildford (Mr. David Howell), in the Daily Telegraph last Friday, which was headed, "Where the Tories can save money," and sub-titled, "Ways of curbing excessive public spending." This is a practical step, I suggest. It was calculated in 1967 that local authorities spend £3,000 million a year on the purchase of materials and the provision of services and, by adopting the Bill, a saving of 5 per cent. a year, of £150 million, might be effected. What a pity that the Opposition did not adopt their present attitude when the Private Member's Bill was before the House.
There is no doubt that the London boroughs save vast sums of money in education alone on the supplies which they receive from the Greater London Council. All hon. Members, I suppose, would like to see the ratepayers' bill reduced, and this is a way of doing so. I note, also, the statement of the Chief Secretary to the Treasury on 15th October about public sector spending. He spoke then of the establishment of a joint local group as an important step in ensuring that public purchasing made its contribution to greater all-around efficiency. The Bill is a strong move in that direction and one which I welcome and support.
§ 5.21 p.m.
§ Mr. Norman Miscampbell (Blackpool, North)
We do not intend to divide the House on this Bill, but that is no reason why we should not look at both its 71 purpose and its scope in a spirit of sceptical inquiry.
First, its purpose. I should be interested in the Parliamentary Secretary's answer to the point raised by my hon. Friend the Member for Poole (Mr. Murton) about what will happen if, in the proposed changes which come with Maud, the ultra vires rules are either abandoned or modified. I agree with hon. Members opposite about ultra vires. It has been, in the past, a problem for local government. I suspect that the Parliamentary Secretary and I first learned about it at the same minute on the same day and in exactly the same class when we studied together some years ago. If Maud is to change the ultra vires rules, what is the purpose of the Bill? What will there be in the Bill that will not be possible in a few years in a completely transformed local government structure, with vastly greater authorities?
Nor should we blind ourselves to the scope of what we are doing. We are giving considerable powers in bulk purchasing, the hire of plant and maintenance. Hon. Members have claimed that the Bill may lead to considerable economies. The hon. and learned Member for Stoke Newington and Hackney, North (Mr. Weitzman) mentioned £3,000 million, spoke blithely of a 5 per cent. saving, which meant £150 million, and said that this would be wonderful. Of course it would, but will we do it? Our experience over the last years of local government trading activities and services has not led to an optimistic conclusion about savings.
But of course there will be some saving, and it will be possible to say that some purchasing is done better. What I fear is that, for such savings as there may be, there will be equal, if not greater, losses.
§ Mr. Weitzman
Surely the hon. Gentleman recognises the value of the Report of the Joint Review Body on Local Authority Purchasing, which included the representatives of all these associations, which went into all these matters carefully and said that it is an essential condition that this legislation should be passed so as to obtain these economies.
§ Mr. Miscampbell
I recognise, of course, the value of that report and do not underestimate it, but it should be remembered that it was drawn up entirely by local government interests and not by other, quite legitimate, interests.
§ Mr. John Wells (Maidstone)
I hate quarrelling with my hon. Friend, but, from the front page of the Burton Committee's Report, giving the composition of the Committee, he will see that he is not entirely right. A great many other people, representatives of central Government and nothing to do with local authorities, were on the Committee.
§ Mr. Miscampbell
Yes, central Government as well. Government bodies were largely involved in this. My point is that commerce and industry, which might be displaced under the Bill, were not represented. I do not press the point further, because I recognise the value of the Committee's work. But we should be careful, when we extend the powers of trading and supply by local government, to recognise the resentment—justified perhaps in certain cases—which it undoubtedly engenders.
But it is not on those grounds that I would ask the House to consider the Bill very carefully. It is because of the accountability and the efficiency, or the lack of checks for efficiency, which so often occurs in local government. Of course, if local government is going to provide certain services subject to this Bill, it is right that they should be offered to others, but this should be done on fully commercial terms, with which outside interests have an opportunity of competing. I suspect that many services which would be on offer from one local authority to another or from one public body to another will lead to strong pressure to use them without considering too closely the commercial advantages or disadvantages.
Computers are a good example. If a local authority puts in a computer, it may not use it entirely. Time may be surplus to requirement and it would be right and proper that it should be used by another authority or public body. The situation may change and I expect that, in future, there will be complete competition for the services of computer time. But while it may be reasonable now to say "Use our computer because we have it," in five or ten or fifteen 73 years it may be a question of "Use this computer, but you should consider carefully whether you use the public circuit computer time"—which will no doubt then be available.
I hope that, over the next few years, bearing in mind how much depends on it in other fields, we shall see a decision about the Maud Report. Whatever view one takes of that report, one thing which is clear is that the House will reach a conclusion about it and that larger authorities of some description will be necessary. It is a pity, in view of the inevitable changes, that we should give these extra powers now and not wait until we see the set-up of the new authorities.
I tie that in with what I said at the beginning, that the Maud Report proposes that the ultra vires rules should be considered. It therefore seems eminently sensible that we should leave these powers to deal with changes which could come then. The scale of purchasing and other powers which will then exist will, of course, be infinitely greater than those which are likely at the moment, with the one obvious exception of London, where there as already vast purchasing.
§ Mr. Weitzman
If large economies can be effected, why should not local authorities have the advantage of them?
§ Mr. Miscampbell
That begs the Question. From our experience, I do not concede that large economies will necessarily follow. As I say, we are open-minded concerning the Bill at this stage. Subject to certain Amendments in due course, it will not be opposed.
My hon. Friend the Member for Worcester (Mr. Peter Walker) has indicated what we on the side intend to press on the Government by way of Amendments. My first comment concerns the word "extensions" in Clause 1(4):'maintenance' includes minor renewals, improvements and extensions".We an; told that that expression is taken directly from the London Government Act, 1963. My only comment about that is that I would not feel bound in this Bill by any definitions that we passed in 1963. The word "extension" opens up a very wide field. After careful discussion in Committee, it may be shown to be a wide field that is properly open. 74 At the moment, however, that word appears to open a wide field for competition by local authorities.
The question of Clause 1(5) has already been mentioned and I will not weary the House with it again. If by Statutory Instrument, however, the Government are to be able to declare any body which is carrying out public functions to be a public body under the Bill, I foresee very wide extensions.
I am sorry to say that I missed one of the comments made by the Minister, not because I was absent, but because I was not paying sufficient attention at that exact moment. I know that the Minister limited the position and said that directions would be given about how far an extension could be made. The hon. Gentleman will, however, be aware, as we all are, that what really matters is not what is said in debate or what directions are given, but the legislation that we in this House pass. As the Bill stands, it is clear that there will be wide powers for the Minister to extend the range of trading. I hope that this can be restricted in a perfectly proper way in Committee.
My last point is one which inevitably comes from this side of the House rather than from hon. Members opposite. As trading increases and as local authorities become bigger, as one suspects they will, so the drive will grow not merely to say that it is cheaper for local authorities to get together and buy. I suspect that it will not be long before the proposal is made that there should be national as well as local government purchasing. That is a move that I would deprecate.
§ 5.33 p.m.
§ Mr. George Willis (Edinburgh, East)
Having listened to the last two speeches from the other side of the House, I am bound to say that the criticism of the Bill does not seem to me to have been very severe. It has been rather of a carping nature than genuinely-based criticism.
I was particularly interested in the speech of the hon. Member for Blackpool, North (Mr. Miscampbell). The hon. Member twice advanced the argument that we should not do anything now because we might be doing something in four or five years' time—not that we will be doing it then, but that we might possibly be doing something. It comes 75 very ill from hon. Members opposite, who are always talking about public expenditure and the wastefulness of local authorities and Government Departments, when we present a Bill to try to reduce that wastefulness or make things cheaper for the ratepayer, to ask why we should do this now and to suggest that we should wait for three or four years until the question of local government is tackled and, possibly, something might be done. That is hardly an argument against the Bill and it is one of which the hon. Member cannot be proud. To pursue that argument a little further, why should we be here at all discussing the Bill? We might as well be in our constituencies.
The hon. Member said that we do not realise the resentment that is caused when the powers of local authorities are extended in this way or they are given powers of this nature. In my constituency, I have not even heard the Bill mentioned. Certainly, I find no great movement of protest surging along the streets of Edinburgh to mass up in Princes Street and demonstrate in front of St. Andrew's House to stop the Bill. I do not know what the hon. Member means by "resentment" to the Bill. I have no doubt that one or two business people will feel rather hurt, but I cannot imagine the miners from my constituency or the steelworkers from the constituencies of my hon. Friends demonstrating outside St. Andrew's House against the Bill. That was the hon. Member's second point about the Bill. Once again, there is not much public evidence of any considerable weight in that argument.
The hon. Member's third and last point was that we should never introduce a Bill of this character because we never know how far it might be extended. There is always a great fear by hon. Members opposite of giving local authorities power to do something which might be extended a little. I have never been able to understand why it is wrong for a group of citizens within an area or a town to decide to do something for themselves. What is wrong about this? The basic argument is whether it is right for local authorities to undertake work of any kind.
We have always accepted that if a certain type of work will not be undertaken by private individuals, the public can do 76 it. I have never been able to understand why we cannot extend that principle and why, if the public regards it as being in its own interests to do so, it should not be able to do the job for itself.
§ Mr. Miscampbell
Would not the hon. Member agree that in that situation a public authority has special tax advantages, is not accountable because it does not pay S.E.T. and has easy borrowing or other advantages? Because it is not subject to the same scrutiny for efficiency, it would be very much to the detriment of a local authority and its members to indulge in such trading.
§ Mr. Willis
I should need to check whether a local authority was or was not subject to this or that payment. The hon. Member is arguing that if there were an unfair advantage, it would be to the detriment of the people. I do not know why. I have never heard it suggested that a business firm which receives a subsidy is somehow disadvantaged by that fact. I always thought that a subsidy or preference was given to help firms and that it was an advantage rather than a disadvantage. Why, then, does it suddenly become a disadvantage when enjoyed by a local authority? I do not know.
§ Mr. Patrick Wolrige-Gordon (Aberdeenshire, East)
. The right hon. Gentleman is making a strong speech in favour of scale. The Bill empowers the local authority to make an agreement in appropriate terms with any public body. What is the right hon. Gentleman's objection to putting the Government in the position of the local authority and amending the Bill in that way?
§ Mr. Willis
I think that this is a good little Bill. I should like to see legislation going much further and the local authorities given much wider powers. Indeed, I should like to see them have general enabling powers. What is wrong with that? It is right, apparently, for a person to be able to undertake almost any form of business—to form a company or a co-operative society—but wrong when he exercises his rights as an elector and citizen and suggests that he and his fellow citizens would like to undertake something. The whole thing then suddenly becomes wrong, and I do not understand why. I do not follow such 77 logic. However, we are not discussing that.
This is a good little Bill. What it does is important and can achieve substantial financial savings. But I cannot understand the argument that the provisions might be extended to all sorts of things. I do not think that they will be, judging by the wording of the Measure. The Bill is long overdue and I hope that it will enable local authorities to act in a manner which will achieve savings for the ratepayers.
§ 5.42 p.m.
§ Mr. John Wells (Maidstone)
I hope that the right hon. Member for Edinburgh, East (Mr. Willis) will forgive me if I do not follow him into the Scottish intricacies he entered into. I notice, however, that there is not a Scottish Minister present, although the Bill applies to Scotland. It is negligent of the Scottish Office not to have a representative here.
This Bill follows the Private Member's Bill introduced by the hon. Member for Bethnal Green (Mr. Hilton) three years ago. We all enjoyed his speech today. I am particularly glad that he reminded the House that the Kent County Council has had the sort of powers proposed by the Bill since 1929. I hope that the experience of the K.C.C. will help to dispel the fears of some of my hon. Friends about this Bill. The Explanatory Memorandum reminds the House:The Bill will not result in any increase in the industrial or non-industrial staffs of Government Departments. It is not expected to produce any increase in local authority staffs and in the long run should produce a reduction….This is one of the most important points, because many of my hon. Friends fear that the Bill would lead to an increase in local authority staffs. I do not believe that this would be the case. The K.C.C. purchasing department has between 360 and 370 employees. This means that the other local authorities it may service by virtue of these powers have fewer employees. Merely because there are more county council employees in Maidstone engaged in purchasing, in the whole of Kent there are fewer engaged in it, and I believe that the central purchasing is done extremely efficiently.
Another of the fears expressed by my hon. Friends, both in debate and in 78 private, has been that the little trader will be penalised. I do not believe this to be the case either. If a small local authority tries to purchase as best it can, it does not know where to turn. It has no expertise or general direction and may, indeed, go to the local retailer only to find that he, far from being a local man, is part of a great chain, and that, far from buying either locally or cheaply, it is probably buying very expensively from a great national or even international concern. Therefore, I believe that, if these powers are given to all the local authorities, purchasing should be both cheaper, which will benefit us all as ratepayers, and without detriment to the little local trader.
As the right hon. Member for Edinburgh, East said about 20 times, this is a good little Bill. It is, indeed, a little Bill. It is not extending local authority trading powers in any dangerous direction. I welcome it wholeheartedly from that point of view.
In Kent, which was a pioneer in this kind of service, the Borough of Folkestone as recently as last year got out a little brochure in the way boroughs are apt to do saying what good boys they are. One of the most interesting parts was where it praised the benefits Folkestone has got from the central county purchasing department. So we need have no general fears about the Bill.
But my hon. Friend the Member for Worcester (Mr. Peter Walker) was right to warn the House and the Government that we shall seek to make certain Amendments in Committee. He also drew our attention to the need to pay proper regard to the provision of proper facilities for costing. As he rightly pointed out, the skill of a successful industrial company depends on its purchasing department. But when comparing purchasing departments, one must pay close attention to overheads.
The hon. Member for Bethnal Green laid great emphasis on the importance of sanitary ceramic ware and said that great advantage could come through standardisation, which in turn would help the British builder and therefore our export trade. I listened to his argument closely, but if various local authorities got together on their requirements about cistern size and standardised 79 their byelaws, we could get standardisation of this sanitary ware much quicker and more cheaply. It is not through the Bill that we shall get standardisation in the British ceramics industry, but through byelaw standardisation. That is where we could get great advantage.
1 want to recall the debate of two years ago. My hon. and gallant Friend the Member for Eye (Sir H. Harrison) then rightly drew attention to one of the fears of the horticultural industry—that, we might get undercutting and false overheads by, for example, a contracts department and a hospital gardening department getting together, achieving no real saving but merely having an extra joint administrator over the two. This fear of more rather than less staff must be uppermost in the minds of some hon. Members, and we must take care that the Bill does not encourage local authorities or a purchasing authority and a secondary purchasing authority to get together and merely have an extra man over and above the staff existing now. I refer the Minister to that part of the speech my hon. and gallant Friend made two years ago on long-term reduction of staff.
The Horticultural Trades Association and the National Farmers' Union have very real fears about the sale of surplus nursery stock. A very peculiar case is being considered at present. About a year ago the City of Liverpool offered a great deal of nursery stock which was surplus to its requirements, but instead of offering it for sale by tender or at public auction, to other local authorities, Liverpool, in November of last year, put an advertisement in the Gardeners Chronicle of which the last paragraph said:Detailed lists with prices on application from the director.The Gardeners Chronicle is a good paper, but it is directed almost entirely at skilled private gardeners. It is not the sort of paper that is directed at municipalities or at Government Departments. It is most improper that such surplus stock should be offered at fixed prices. In this case, the fixed price was extremely low and was an example of undercutting. Disposal should be by tender, and the trade should have first option. In Committee, I shall seek to move an appro- 80 priate Amendment. I shall probably relate it specifically to horticultural produce, but others of my hon. Friends may wish to cover parallel cases.
A case which is even more disturbing, though it took place rather longer ago, relates to the activities of the Scunthorpe Corporation. An advertisement appeared in the Scunthorpe Evening Telegraphon 15th November, 1967, saying that the Corporation intended to offer a landscape gardening service not only to council house dwellers, but to occupants of private houses. This is a further example of the inevitable yearning of local authority trading departments to do a little empire building. I hope that a close watch will be kept on that trend. Perhaps in Committee we could insert a new subsection (3) in Clause 1 so that local authorities could not undertake new landscaping work any more than they can do new building work. That would meet one of the substantial objections made by both the National Farmers' Union and the Horticultural Trades Association.
A municipal activity of which I take a very serious view and which has worried a number of people was that engaged in by the Lindsey County Council some two years ago. The Lindsey County Council sent round the horticultural trade a schedule of goods to be tendered for in respect of a number of planting sites. The first planting site was for the county land agent—that was quite proper. So were the second and third sites. The next sites were for the county chief fire officer—again, perfectly proper. But the next was for a private gentleman whom I shall not name but who lives at Burton-on-Stather. It was a very massive scheme. The next was a modest scheme for a lady, living in Caenby. It all seems to be very peculiar.
Then the county council called for tenders for a very large number of trees for the Cottam Power Station, which presumably belongs to the C.E.G.B. but certainly does not belong to the county council. Then there were plants for the Gainsborough Urban District Council, the Mablethorpe Council, the Nettleham Parish Council, and others. All these local authority items would be acceptable once this Bill was enacted, but I object to those cases that appear to involve private individuals. Another item was a 81 development at Sudbrooke Lane, Scothern, for a named developer.
It all seems to be very peculiar. One realises that county planning officers frequently demand the planting of trees when they are giving planning permission, but county council tenders should not be put out for planting trees for private people. The Minister has been asked already to be a little more precise in listing the public bodies which could trade with municipalities or county departments under the Bill. I see, in connection with the same schedule that I dislike so much, that very sizable trees were to be planted in an extension to a burial ground. That would be extremely unsuitable, because the same local authority would have to provide bigger and better picks and shovels for the grave diggers. It seems to be an instance of foolish buying. In such cases there is need for expertise in purchasing.
I give a broad general welcome to the Bill. My own county has pioneered the way. Specified safeguards are needed in relation to horticulture. Hon. Members on both sides will probably have received notes from the National Farmers' Union on the topic. I hope that in Committee the Minister will keep an open mind, and will accept some sensible Amendments, particularly in relation to landscaping and the sale of surplus stock.
§ 5.59 p.m.
§ Mr. Cyril Bence (Dunbartonshire, East)
I share the concern expressed by the hon. Member for Maidstone (Mr. John Wells) about local authorities having power under the Bill to do landscaping for private housing estates. Many county authorities are insisting on what is called open planning, which is an idea that has probably come from this part of the world. Unless county authorities, which have traditionally purchased their shrubs, trees and bushes from nurserymen, continue to do so, I doubt very much whether these open planning schemes will be successful in the long run. Local authorities must have power under the Bill to renew their stocks by purchases from the large nurserymen. It is a mistake to think that because a local authority undertakes landscaping and planting on these housing estates it is taking work away from the private nurseryman. That is not so. More 82 often than not the local authorities get their original stocks from the nurseries. Many of our great nurseries depend largely on local authorities of all kinds for a good deal of their business. Under this Bill what has been suggested by the hon. Member would be a further advantage in the circulation, enjoyment and use of nursery stock of all kinds. I do not believe that it would be in competition with nurserymen but of assistance to them.
§ Mr. John Wells
I do not dissent at all from what the hon. Member is saying. He has perhaps slightly misunderstood me. I welcome the Bill and I welcome the sale of more nursery stock, but I am a little alarmed about unfair trading as suggested in the specific cases I have quoted.
§ Mr. Bence
We all are concerned about what is called unfair trading. As one who worked in an industry affected by 33 ⅓per cent. duties on its products, I appreciate what is unfair and what is fair trading. I cannot imagine a county authority indulging in unfair trading in competition with nurserymen or anyone else. From every contact I have and from all inquiries I have made I find that the major customers of nurserymen are local authorities. A county borough buys vast quantities of plants from nurserymen. I see no reason why, instead of gardeners standing about doing nothing, they should not be employed by such an authority to use some of the stock bought from the private nurseryman in landscape schemes which the authority has in its county.
We all support this Bill but I hope that the practice which has existed over many decades when a good Bill such as this is brought forward will not be followed. Someone always finds a reason, however obscure and unfounded, to oppose such a Bill and to give warnings about its dangers. Every radical and progressive step we take is met by warnings that it is a dangerous thing. If this Bill will ruin the nurserymen of Great Britain, Sam McGredy of Northern Ireland or Wheatcroft, I do not know where we are. The more we enable local authorities to indulge in landscaping and to plant trees and shrubs in open plan schemes, the more it will benefit nurserymen.
I suggest that before the Bill becomes law all the nurserymen will send out 83 circulars to all local authorities. They will read this debate and then "get cracking" producing brochures which they will send to every local authority urging that trees and shrubs should be planted. They will start recruiting gardeners to meet the need for these nurserymen. They have been ignored by the National Farmers' Union which is not interested in the producers of fruit and flowers. The Horticultural Trades Association has had a raw deal. I hope that local authorities will patronise them more as a result of this Bill, because English horticulture is as good as any in Europe.
§ 6.5 p.m.
§ Mr. Walter Clegg (North Fylde)
I apologise for not being present during the whole debate, but I had other duties to perform. I had the advantage of hearing the hon. Member for Bethnal Green (Mr. Hilton) when he brought his Bill before the House. I echo the fears which have been expressed by some hon. Members that there might be an increase in some local authority staffs. The Explanatory Memorandum to the Bill says that it is not expected that there will be any such increase, but I beg leave to doubt that. There could probably be an increase if any" empire building" takes place. This is something which local authorities should watch very carefully.
The establishment of a purchasing power demands skill from those who are to operate it. They have to judge what the demand from other local authorities and public bodies will be. It would be very easy for over-buying to take place and the ratepayers of such a local authority would then be unhappy. The fact that skill will be needed to operate these services properly leads me to believe that there might be an increase in staff. New methods of operating stock yards are growing increasingly complex and there might be an increase in the number of invoice clerks and other people on the periphery.
My main purpose in speaking is to ask certain questions about the legal relationships between local authorities which combine on certain projects. This is a complex question which should be considered in Committee. One of the complex areas of civil law concerns the com- 84 plication which arises over negligence when machines are hired out by one person to another. I understand that under the Bill a local authority could hire out a bulldozer to another authority. What would be the position if that bulldozer injured a third party? Who would the third party sue—the corporation supervising the job or the one which hired out the vehicle? I presume that the ordinary civil law would operate, but attention should be given to this point when we are in Committee.
Another problem which is likely to arise concerns the question of contract. It appears that under the Bill a local authority could provide administrative, professional or technical services. It has been said that one local authority could do the job of planning a school or a sewerage system and another local authority could do the building. What would be the position if a local authority lent technical staff not only to advise but actually to devise a specific structure? Take the example of a public hall. Perhaps a rural authority with no design staff could go to a county council and ask if its staff could design the hall. The hall would be built in accordance with the design, but there may be a defect as a result of which part of the hall falls and people are injured. Who should those people sue—the local authority which built the hall or the local authority which designed it?
Another aspect in which third parties are not involved is the legal relationship between the authority hiring out personnel and the authority using their services. Take the same public hall. Suppose that owing to a defect in design it was unsatisfactory and had to be remedied at a cost of several thousands of pounds. Would the local authority which used the service be able to sue the other local authority in damages because of bad design? It is as well to be quite clear about what these legal relationships will be.
If local authorities hire out personnel and are not liable both in contract and perhaps tort to those using them, we could have a very complex situation. What I am most cencerned about is that the person who is injured or suffers as a result of one of these arrangements should know whom he has to sue. It is a very 85 expensive business for someone to sue the wrong person and then have another person joined in as a third party. This is a complex branch of the law and perhaps we could have some guidance from the Government Front Bench on these matters today or in Committee.
§ 6.12 p.m.
§ Mr. Peter Emery (Honiton)
I would like to give a general welcome to the Bill, because I believe that it allows local government to obtain the same efficiency and major cost savings which are obtained by well-organised industry and private enterprise. This is surely what all hon. Members would wish local authorities to be able to do. Secondly, it recognises that people who spend vast sums of money—and the figure of three American billion or £3,000 million has been bandied around the House—should be properly trained and highly proficient. The remarks of my hon. Friend the Member for North Fylde (Mr. Clegg) are absolutely correct.
Thirdly, the Bill underlines the fact that, with the exception of certain notable examples, the procurement and supplies function in local government is hoplessly inadequate and so out-moded as to cost the ratepayers many millions of £s a year. It would be right, although I have no pecuniary interest, to state that I am the Director of the Institute of Purchasing and Supply and the Secretary-General of the European Federation of Purchasing, which allows me to speak with some background knowledge of the general proposition that I am trying to put to the House.
Certain items have been mentioned cost savings and worries have been expressed about the extra expenditure which might be necessary on the part of local authorities in obtaining the necessary staff, running overheads and dealing with the general operation of the supplies department. I would like to give some figures about this. First, the city of Leicester put forward certain information to the Joint Review Body about the total savings it believed it was able to make annually for 1955–56 to 1965–66. These started in the region of about £17,000 in the first year, rising to a figure of about £93,000 in the last of the 11 years. It believed that in toto it saved the ratepayers of Leicester something in the region of £565,000. If we take the mean of these 11 years, 1960–61, and take the total of 86 a penny rate in that year, the penny rate being £19,624, it will be seen that this saved the ratepayers of Leicester approximate 2½d. to 2¾d. on the rates every year. If that can be done in Leicester it ought to be done in many other areas.
I turn now to the figures in respect of the G.L.C. What has been very much neglected in the debate is the fact that this Bill is only permissive. It does not force anyone to join a conglomeration or to go into any form of co-operation. It is only if the local authorities want to do it. Since the 1963 Act dealing with the G.L.C. we have produced some interesting figures. The first set relates to what the G.L.C. calls its "non-captive customers", in other words the boroughs outside which normally have their own powers to carry out purchasing but which have decided to opt in and have the G.L.C. Supplies Department do part of their purchasing. The amount that has been opted in by the 33 Outer London boroughs has risen from £3,953,753 in 1965–66 to £4,365,942 in the last year.
These London boroughs are asking the G.L.C. to do this work because they are getting better service and prices, because it is carrying on an efficient and useful service. It is interesting to note, returning to the Leicester example, that the cost of running that supplies department was something under one-quarter of a penny rate in 1966–67. This puts the cost factors of the supplies department into a correct relationship with the type of savings it is possible to bring about. I will not go over what I said in December 1967, but it is important to make people understand that many of the modern techniques of proper industrial purchasing—vendor rating, quality control, reliability control, standardisation procedures and the necessary training—can only be carried out where there are properly oriented supplies departments.
The real problem at the moment is that there are not anything like enough supplies departments in the majority of local authorities. I believe that there are only 15 places throughout the country where there is a proper supplies organisation functioning. Because an authority is setting up a central supplies department, or because a smaller authority is asking that the county or some other public body should carry out certain purchasing for it, this does not mean that it has to buy everything. Nor does it mean that 87 every consumable item is bulk purchased. Most supplies departments spend a considerable amount of time working out what ought to be bought in quantity and what ought not.
Because of the concern which has been shown in the Press today about the building industry, I contacted the Liverpool City Council this morning. It is one of the few bodies which actually buys building materials. I was intrigued to learn that on the whole, other than bricks and cement and other large contract items, the majority of materials for building and maintenance is bought through building merchants. Therefore, it is important to realise that the existence of a central supplies department does not mean that everything will be bulk purchased or that one can do away with a considerable amount of the normal supplies functions of retailing and wholesaling throughout the country. That would not be the case.
It is for this reason that I should like to comment on some of the arguments which are being circulated against the Bill. One argument is that the Bill contains proposals for an enormous increase in the purchasing powers of local authorities. That is not true. No extra powers are given to local authorities to buy things. All that the Bill does is to allow local authorities to get together and buy more efficiently that which they already have powers to purchase.
Secondly, it is said that no detailed examination appears to have been made of the prospects of achieving the expected economies which some of us who are advocates of this Bill have put forward. That statement is not true. The facts of the cases which were presented to the Joint Review Body are available to anybody who wants to know what they are, and they are innumerable. It is not right to say that there has not been a proper examination of this matter.
It is also said that although a group of local authorities providing large orders could, no doubt, obtain lower prices for supplies, they would have to assume responsibility for storage, breaking down bulk loads and redistribution. This statement again is untrue because much of the type of purchasing that a central supplies department will do will be arranging 88 call-up contracts—in other words, being able to arrange a contract at a better price because it would be for a much larger amount of the commodity, and then having the local authority which wishes to take up part of this contract indent from the manufacturer or wholesaler and have the commodity delivered directly to him.
Indeed, if one looks at the way in which the Greater London Council has done this sort of thing, one finds that its items which are stocked and then distributed are in the region of a quarter of all the items that it purchases. In other words, about 75 per cent. is not kept in stock or in store.
It is said also that the extra cost of those authorities' additional responsibilities would mount as more and more smaller authorities were involved. This again shows a complete lack of understanding of what a central supplies department does. It is just as easy to negotiate for 10,000 as for 5,000. There is no increase in the overheads. In fact, one would be cutting down the staff in the smaller authorities which are having to do the odd amount of purchasing and one would be handing over this work to the central authority.
It has also been said that central supplies departments do not work towards British Standards Institution objectives. I do not believe that is true. I should like to quote from a book on central purchasing issued by the Institute of Municipal Treasurers and Accountants. It says on page 40:We found that amongst local authorities which had made any attempt to introduce standardisation the most widely used standards were those issued by the British Standards Institution.Therefore, it is much more likely that local authorities which have supplies departments are working towards a variety reduction factor, which means greater standardisation. Indeed, the number of local authorities which have representatives on certain B.S.I. committees is growing each year.
An important factor to bear in mind is that since the introduction of the Private Member's Bill we have had the support of the local authority associations. It is important to bear in mind that at the joint meeting of the County Councils Association, the Association of 89 Municipal Corporations, the Urban District Councils Association and Rural District Councils Association, it was unanimously recommended that the Ministry of Housing and Local Government be urged to introduce legislation, and the majority of the elected representatives at that meeting were Conservatives.
The criticism has also been made that there was no real knowledge of industry on the Joint Review Body. I will not mention all the individuals on the body, but I have picked out at least five of the members serving on that body who are in command of, or have had a large experience in industry, retailing and finance generally.
Having passed praise and given the reasons why I think there should be general support for the Bill, I believe it is only fair that we should ensure that the Bill is examined a little more closely than some hon. Members would like. I do not believe that it should be possible to use this Bill as an extension of a direct labour force. It would be entirely wrong and inappropriate if this Bill were to be the vehicle for such an extension. I am absolutely certain that the Opposition must attempt to insert Amendments so that that cannot happen.
I should like to reiterate—having been allowed to comment on this point when I intervened in the Parliamentary Secretary's speech—that there might well be a financial limit applied to the building of extensions. I gather that the extension to one of the London teaching hospitals will cost in the region of £7 million, and obviously that is not what is intended under this Bill—or at least, I hope it is not.
The other thing which the Bill is not intended to do is to increase inter-local government trading. That is not what is intended. On this point to some extent I cross swords with my hon. Friend the Member for North Fylde. I do not envisage the Bill giving power to one architect's department to produce architectural plans for some other local authority. I cannot read that into the Bill, and I hope that the Parliamentary Secretary will say whether that type of service—a specialist building service, or architectural service—would be transfer- 90 able from the county to, shall we say, Axminster Rural District.
§ Mr. Arthur Jones (Northants, South)
If my hon. Friend is to follow the logic of his argument that the great advantages lie in bulk purchasing and standardisation, it must follow that there should be co-operation between architects' departments in the matter of building materials. Surely, unless this is done, one cannot achieve the maximum standardisation.
§ Mr. Emery
I follow the argument. What worries me is the possibility of standardising architects' departments just in the county. I do not think that would be advisable at this stage. My general view is that all of the architects' departments are overworked, and if that is so the idea of passing work to the centre so that the departments would be more overworked was not exactly what I had in mind. I should, therefore, like some definition of this matter from the Minister.
§ Mr. Hilton
The hon. Gentleman is under a misapprehension about architects' characters. It is well known that one architect will never agree with another. One of the reasons why we have been held back in the use of industrialised systems developed by private industry and in the investment of money in the use of such systems is that architects in different local authorities will not agree with one another.
§ Mr. Emery
I do not wish to be drawn into an argument which might well be out of order on this occasion.
I welcome the Bill and support its Second Reading. I believe that there are reasons for fearing that in certain respects it may go too far, but, on the whole, I believe that those questions can be dealt with in Committee with sufficient definition to ensure that the Bill does not go beyond what the Minister has said is its intended purpose.
Against those who argue, "Why not wait till local government is reorganised, and then the Bill will not be necessary", I reply that local government reorganisation will take much longer than the Government lead us to believe. There are large sums of money, many millions of pounds, to be saved for the ratepayer, and the sooner we can have those savings 91 brought into the coffers of local authorities the better for all of us who pay rates.
§ 6.31 p.m.
§ Mr. Alex Eadie (Midlothian)
First, I apologise to my hon. Friend the Parliamentary Secretary for not having been present at the outset of the debate. I had another meeting to attend, and I am sorry that I could not be here. I have listened to most of the debate, however, and I feel compelled to intervene because of the very qualified acceptance which the Bill has had. The hon. Gentleman the Member for Honiton (Mr. Emery) almost fell flat on his face when he stressed that the Bill was permissive and then said that he would ensure that Amendments were made to make certain things mandatory on local authorities. That seems illogical.
§ Mr. Eadie
I need make no comment on that. The hon. Gentleman has conceded my point. He talks about permissiveness and then wants to make certain things mandatory. He has confirmed the point which I made.
The hon. Member for Honiton took care to state his qualifications to speak in the debate. I cannot emulate his qualifications, but I am entitled to say what my qualifications are. I was for nine years the housing convener in a county authority, and for many years I was chairman of a county education authority. Therefore, I have had some experience of bulk purchasing and organisation within a large unit of local government administration.
I cannot for the life of me understand the difficulties expressed by some hon. Gentlemen opposite when they read into the Bill that there could be legal difficulties between authorities if they went too far. I do not know the structure of local government in England, but I am sure that there must have been an interchange of services between local autho- 92 rities going on for a long time. For example, an education authority will seek the help of the county parks department. In my experience as a county education chairman, I have had to seek the advice and help of a county parks department in doing a particular job. Administratively, it was probably more efficient that we should seek the guidance and practical help of a county parks department in doing various works. I have never encountered legal problems in that way. If the job was not done properly, there would be not a legal problem but, so to speak, a physical problem, and the department would be asked to come back and do the work properly.
In the same way, district councils in Scotland in the past, without any legal difficulties, have often sought the advice not only of the parks department but of the architect's department, too. If a district council wanted a hall or something constructed, it would ask the architect's department to design and construct it. There were never any legal difficulties involved. I am a little surprised, therefore, when qualified approval is given to the Bill and Aunt Sallies of that kind are brought into the discussion to justify it.
To return for a moment to the point about permissiveness which the hon. Member for Honiton raised, I hope that he will concede that the House has at times had some sad problems created in that way, and many of us on both sides have said that, if only a certain piece of legislation had been mandatory rather than permissive, there would have been less trouble for the House and, sometimes, less trouble for the local authorities concerned. We should not, therefore, be too worried about whether the Bill itself is permissive, or even whether it is a good thing that such legislation should be permissive.
The hon. Gentleman hoped that local authorities would not use the Bill as a vehicle for extending the work of direct labour departments. I find no such problem in the Bill. It would depend on the kind of services which a local authority wished to provide. At one time, I was concerned about the provision of enough schools and enough houses, and I was concerned about cost as well. What we did was a profitable exercise 93 for the local authority and for the ratepayers. We went to Scandinavia and picked out our own wood. We hired our own ships. We brought the wood from Scandinavia and processed it in Fife where I live. We were able to build a better standard of house and a better standard of school. It was profitable and of some advantage to the authority. If a local authority adopted that form of bulk buying, I do not think that it would seek to run roughshod over the Bill or that there would be anything wrong in it. As I say, it depends upon the circumstances of the authority in deciding to indulge in that sort of bulk buying.
1 know that some hon. Gentlemen do not like that to happen, but in my experience—and I am entitled to quote my experience in these matters—it was profitable to the ratepayers and it accelerated our school building and house building programmes. I was proud that I was one of the pioneers in the building of our own schools and houses. For over 20 years before I came to the House, I was a member of a local authority—
§ Mr. Arthur Jones
I completely follow the logic of the hon. Gentleman's argument. That is why I cannot understand the provision in the Bill which excludes work other than extension. There is no logic in preventing new building under the Bill as well, is there? What reason can there be for it?
§ Mr. Eadie
I suggest that the hon. Gentleman discusses that with his hon. Friend It was his hon. Friend who brought the issue into the debate. If there is disunity on his side, let the hon. Gentleman solve the problem in discussion with his hon. Friends.
In my constituency, we have a very progressive town council. It is progressive to the extent, for example, of being one of the very few authorities which changed the tenure of council house let-tings so that it now runs on a joint tenancy basis between the man and the woman. This is a very good thing, which gets over serious legal difficulties. This authority gives tenants a service which they greatly appreciate. For example, it decorates for them at cost. This is very efficient for the council and the ratepayers and there is nothing wrong in that. The Bill has been given qualified 94 approval, but we have been told that there will be many Amendments to it in Committee. I hope that none will ride roughshod over the points which I have made.
I believe that the Bill is good, as is local authority administration, on the whole. Rather than trying to challenge the efficacy of local authority administration, we should give credit where it is due to local administration which takes into consideration the whole question of bulk purchases.
§ 6.42 p.m.
§ Mr. Arthur Jones (Northants, South)
I am glad to follow the hon. Member for Midlothian (Mr. Eadie). My intervention a moment ago was designed to help him. He criticised the fact that the Bill was restrictive, since it did not allow local authorities to do new building.
I welcome the Bill so far as it tries to improve local government efficiency, which is a desirable and sensible objective. In the light of the report of the Royal Commission on Local Government and in view of the point about management techniques and L.A.M.S.A.C, organised by local authorities, and the growth of joint computer services, a lead has been given in this direction. As for co-operation in housing, it has been found that there were not great savings through multiple contracting and so forth in housing schemes, but some substantial savings were made in the unifying of design and the bulk ordering of components. Small authorities, linked with large ones in consortia, enjoyed economies of scale and standardisation.
But we should consider some of the disadvantages of this proposal in the relationship between public and private enterprise. These proposals extend local government activity far beyond what we have been used to. The Parliamentary Secretary mentioned expensive earth-moving equipment as an example. That can be hired out to other authorities. Local authorities will, in fact, be dealers in these commodities and services. But as local authorities, they will not be able to run losses. The same profitable judgment as in private enterprise will not be necessary, since any losses can be subsidised by a precept on the rates—as has happened extensively over direct labour. 95 They need not look for the commercial margins that private business seeks. Local authorities will also have tax advantages—and exemption from S.E.T.
There cannot be an exact comparison, but we should consider the disadvantages at which private business will operate vis-à-vis local authorities. There are contradictions in the Government's proposals. In Circular 57 of 1969, local authorities were required to put out to tender, in competition, the work of their direct labour departments. The Parliamentary Secretary made an unguarded reference to the worst forms of municipal enterprise when referring to those departments.
This is what I was going to say to the hon. Member for Midlothian. Why should not local authorities, in the context of the advantages which it is alleged will flow to the economy in terms of higher efficiency, also do new building work? I see no logic in including additions but not new work. My hon. Friend mentioned a hospital extension costing £7 million. There is certainly a contradiction here.
Current decisions limit local authority freedom in education and housing—over rent policies and the sale of council houses, for example. The Government are basing their case for the Bill on giving greater freedom of operation to local authorities, but they deny that freedom in other respects. This is a further contradiction.
My hon. Friend said that this would not involve any more public money, but it must do, because local authorities will have to stockpile: they will not order all their materials on the basis of broken loads and so on when they have a bulk order.
§ Mr. Emery
May I try to help my hon. Friend? When one is buying for many people, all of these individuals hold a minimum stock level. This is normal in industry when one holds a single central stock which is less than the amount of stock all around the periphery. So, on the whole, one should be able to make savings in the amount of capital tied up.
§ Mr. Jones
Yes, that case could be made about dead stock, but I do not think that my hon. Friend's point would work out in practice with quite that simplicity. If the Bill is to achieve the in- 96 tended purpose, local authorities will involve themselves in the purchase of capital equipment which they will loan around. The plant hire business has been one of the growth industries. If this is going to be interfered with, are we sure that the equipment will be better used under this system? There will be added demands upon public resources at a time when they are being so substantially restricted. This is a further contradiction.
Central Government is exercising very tight control, as they should, in this respect. I have believed for many years that we should not have an open-ended commitment by local government but that it should be brought within any extension of the gross national product and that there should be reserve powers, effectively influenced by central Government.
When local authorities have wanted this power they have been able to obtain it easily. For example, reference has been made to the London Government Act, 1963, under which the G.L.C. built up a bulk purchasing department. Other authorities have done the same, and my hon. Friend the Member for Honiton (Mr. Emery) mentioned Liverpool. Local authorities have in the past been able to use the Private Bill procedure for this purpose. One is, therefore, bound to question the purpose of a substantial extension of this facility throughout local government.
We have an indication that the Government wish to encourage further munici-palisation. I cannot see any other reason for the Bill, since the existing facilities have worked satisfactorily. There are, however, contradictions between present policy and what we are seeing in the Bill, for the Measure represents a substantial departure in principle from what has been practised in central and local government hitherto.
The Minister mentioned the ultra vires rule, and I am aware of the feeling in local government that there should be greater power, but I cannot understand why this move should be addressed specifically to this sphere of local government administration. Without undue bias I have looked carefully into the matter, and what I find is the Government taking a further opportunity to make a logical extension of Socialist ideology 97 into municipilisation. I do not criticise them for that because it is within their political philosophy. Whenever there is an opportunity to do so, hon. Gentlemen opposite like to further their principles. However, it is in contradiction to the philosophy which I and my party hold and I therefore question the purpose of the Bill.
I am not saying that the G.L.C. has not effected economies, but I sometimes doubt whether such departments are costed like private enterprise. For example, are the tax disadvantages which private enterprise must bear allowed for? There is substantial evidence to show that municipilisation in this form stands condemned in terms of efficiency and the effective use of resources.
§ 6.53 p.m.
§ Mr. A. P. Costain (Folkestone and Hythe)
Although I heard the opening of the debate, I apologise for not being in my place for most of the following speeches. I was taking the chair at a meeting of a tourist resort committee which was of considerable interest to my constituency.
Such of the debate that I heard leads me to conclude that this is a Measure which, like all Socialist Measures, is probably perfect in theory but extremely irrational and out-of-this-world in practice. I had the opportunity of speaking on the earlier Measure, when I expressed my views in detail, so I will not repeat the arguments that I adduced on that occasion.
My hon. Friend the Member for North-ants, South (Mr. Arthur Jones) surprised me when he advocated that the Bill should include the development of new buildings as opposed to maintenance work and extensions.
§ Mr. Arthur Jones
I did not advocate that. I said that there appeared to be no logic which stopped the Government's proposals from doing so, though I am thoroughly against it.
§ Mr. Costain
I obviously got the wrong impression and I am pleased to hear that my hon. Friend is against including such work, which should not be included, because if a local authority cannot carry out direct work efficiently for itself it will have no hope of carrying it out efficiently for somebody else.
98 I should at the outset declare my interest in that I am a builder. I am, therefore, against direct labour. However, the fundamental point to remember in discussing the Measure is that we require certain services for the running of the nation and that some of these can be carried out by private enterprise or municipal organisations. Because a municipal organisation has large purchasing power—partly because it is spending the ratepayers' and taxpayers' money rather than its own—there is an opportunity for bulk purchase.
My hon. Friend the Member for Honiton (Mr. Emery) gave a good example when he referred to Liverpool. We have crossed swords on this issue before and my hon. Friend knows my attitude to it. He pointed out that Liverpool Corporation's bulk purchasing department was bulk buying with the idea of the Corporation's smaller units not having to obtain materials from suppliers. That makes a good deal of sense and it is carried out by companies which have large groups. My firm operates in such a way.
However, if one carries through this development to its logical conclusion one is bound, in the end, to cut out the builder's merchant who supplies bricks and cement. In the ordinary running of a business and in the normal operations of the building industry somebody must carry stocks of bricks and cement for the smaller operator. Thus, the more one restricts the amount of business that such a builder's merchant can do, the higher will be that merchant's overheads for the remainder of his business, which must still carry on.
One may ask why a local authority should not buy in the most competitive market and supply all its units as well as adjoining local authorities. Under the Bill a local authority in one part of the country could supply any other authority anywhere else in the country. However, from practical experience, I have found, human nature being what it is, that when one authority deals with another there is a relationship similar to that existing between cousin and cousin. Hon. Members will know what I mean. When cousins deal together they tend to feel that they are right, and a certain amount of prejudice is bound to arise. I say this with feeling because I know how tendencies of this type occur in large groups.
99 No purchasing organisation, particularly in the building industry, can always order precisely the quantities that will be required. Somebody in the chain must hold stocks. I was responsible, under Nye Bevan, immediately after the war for organising the Airey House scheme under which 20,000 houses were built. We supplied all the local authorities and helped with the ordering. Everything went well for the normal operations of the scheme.
But the same cannot be said for the smaller operations and maintenance work that followed. No stocks were carried and we were not able to draw spares and additional units of materials from a central point. I fear that the same will occur under this Measure. We were able to purchase efficiently and cheaply for the main bulk of materials, but as time passed the cost became more apparent.
If it is possible to make savings by bulk buying, obviously it is sensible to do it. However, often it is not unlike the "price leaders" in many supermarkets. It is always possible to pick out one item which is extremely cheap. I am told that it is possible to buy whisky in a supermarket cheaper than the wholesale price. If one wishes to buy only whisky, obviously a supermarket is the place to go for it. However, the apparatus of this type of Bill goes wrong in arriving at the effectiveness of it from a national point of view. A good argument can be put forward for buying one product but, for the overall picture, it must be looked at from a national point of view.
§ Mr. Emery
Will my hon. Friend comment on the history of the borough of Folkestone where, it is said, there has been ample proof of the advantages to be derived from the bulk purchasing activities of the county supplies department, and local ratepayers have been saved many thousands of £s? Why should not local authorities in Devon have the advantages which, because of the Kent County Council Act, local authorities like Folkestone enjoy?
§ Mr. Costain
I know that my hon. Friend has been waiting for an opportunity to put forward that argument. There is no reason why local authorities in Devon should not have that facility.
100 I do not propose to vote against the Bill, because I am sure that we believe that our own local authorities are made up of sensible people and that they will apply the Bill in a sensible way. Unfortunately, however, all local authorities are not given the wisdom of my hon. Friend's local authorities and the borough of Folkestone. Many local authorities do not appreciate the problems confronting them and do not realise that if they buy goods from a bulk supply they will deprive themselves of the natural service which should follow. Often when one buys a product wholesale it is impossible to find anyone to service it. For the sake of authorities like that, while I support the Bill on Second Reading, I am glad that my hon. Friend the Member for Worcester (Mr. Peter Walker) has said that he will insist on suitable Amendments before it comes back to the House.
§ 7.4 p.m.
§ Mr. Graham Page (Crosby)
In moving the Second Reading, the Parliamentary Secretary said that it was the intention of the Bill to save the ratepayer money. We on this side of the House welcome that. It is not always evident in the legislation of this Government. It is also obvious that the intention of the Bill is to give more freedom to local authorities. That again is not always evident in the legislation of this Government.
In view of that, the hon. Gentleman must not be surprised if some of my hon. Friends approach the contents and details of the Bill with a certain amount of suspicion.
We have seen it before, of course, and I congratulated the hon. Member for Bethnal Green (Mr. Hilton) on having his Bill accepted by the Government word for word. The Second Reading debate on the hon. Gentleman's Bill two years ago was adjourned with many hon. Members still wishing to speak. It has been adjourned for two years, and we are happy to come back to it.
Two years ago, we had something like a debate on a White Paper on the subject. We were dealing with a Private Member's Bill for which the Government took no responsibility, and we considered it to be the right time at which to express our doubts. We expressed the doubt then that the Bill appeared 101 to authorise a substantial extension of municipal trading by rate subsidisation which might result in unfair competition with the ordinary trader and in a burden on the ratepayer.
Fears were expressed that bulk purchasing with a view to inter-trading between authorities might lead to a need for excessive warehousing, a need for an elaborate organisation for the distribution and delivery of goods, a need for a lot of finance to support buying and holding stock, and might result in surpluses through lack of foresight for which the ratepayer would have to pay. It was feared that all this might be carried on without the necessary expertise. Some of those fears have been expressed again today.
I remind hon. Members that the House was considering a Private Member's Bill for which the Government did not take direct responsibility, although undoubtedly there are taxation problems arising from it. Selective employment tax has been mentioned today. Furthermore, the debate took place at a time when the Redcliffe-Maud Commission was still sitting, as was the Joint Review Body on Local Authority Purchasing. We did not know either the form that future local government might take or the view of a very eminent body set up by the Ministry of Housing and Local Government to consider this matter.
My hon. Friend the Member for Poole (Mr. Murton) and the hon. and learned Member for Stoke Newington and Hackney, North (Mr. Weitzman) have referred to the Joint Review Body on Local Authority Purchasing and its constitution. There were on that body not only officials of local authorities, but local authority members and a number of representatives of Government Departments to provide their knowledge of the subject. That body did not report until January of this year. We have now had an opportunity to read its report, and we know that the local authority associations and the Greater London Council, represented on that body, have passed a resolution inviting the Government to introduce this legislation. We must assume that the local authorities are in favour of legislation of this nature. That resolution was followed by a meeting with one 102 of the Joint Parliamentary Secretaries, who confirmed that it was the intention of the Government to sponsor this Bill.
The Joint Review Body on Local Authority Purchasing sets out some very interesting and helpful arguments in its report. It does not set out any convincing evidence. Nevertheless, because that emminent body has come to certain conclusions, although the House should not feel itself bound by them, we ought to give them full weight and attention.
Of special interest in connection with the Bill are the paragraphs discussing, first, the existing purchasing activities of large local authorities for themselves, and second, the existing purchasing activities of local authorities which have the power to purchase for and to distribute amongst other local authorities. Quite apart from Private Acts giving these special powers, a number of local authorities practise bulk purchasing on a large scale because they are large authorities. There can be no doubt that the practice results in price reductions.
All the fears about financial commitment, warehousing, unwanted surpluses and rate subsidisation apply equally to the large local authority which is merely buying in bulk for itself. It is a difference in degree whether a large local authority is buying for itself or for an organisation of other authorities in addition, but it is a matter of degree only so far as bulk purchase is concerned. It is different in nature from that which is to be authorised under the Bill, because the Bill talks about not only bulk purchase, but trading between local authorities. I may be using a contentious word in saying "trading" between local authorities, but at least it is distribution of the goods and, I assume, payment for them amongst a number of local authorities. So there is that distinction between what is to be authorised under the Bill and the practice which goes on by any one large local authority at present.
We should not overlook that the law already allows local authorities to combine for these purposes in connection with certain functions. Under the Public Health Act, 1936, which codifies the previous law, local authorities have power to combine and do what they are to be permitted to do under the Bill in connection with their public health functions. 103 That covers a wide sphere or local authority activities.
In addition to that general power to local authorities under the Public Health Act, 1936, many of them have been given power by Parliament in Private Acts to combine their operations in the way indicated in the Bill. I estimate that three-eighths of the county councils in England already have the powers which we are offering in the Bill. Most of them cover a restricted area, namely, the county and not the whole country. They have not the power to enter into agreements with any local authority anywhere in the country. Most of them are restricted to their own county and some to the neighbouring county as well. However, nearly half the local authorities in this country have this power already. The result is that more than a third of England, and at least half the population, can be covered by the kind of agreement about which we are talking.
When private legislation has gone so far, it is right for Parliament to consider whether this should be brought into public legislation and, if so, under what conditions and restrictions. When a private Bill is presented to the House the promoters have to prove special need of their district to justify it, but provision canoe made for that even in public legislation. I will refer to that point later.
In the local authority Bills which have come before this House over the last 20 years, powers of the nature described in the Bill have nearly always been divided into two categories. First, the supply of goods—that is the power indicated in Clause l(l)(a)—and, secondly, the reciprocal services, which are set out in Clause 1(1)(b), (c) and (d). The restrictions on those powers, which have been given in private Bills, so far have differed, but the general pattern which has worked out is that for the period 1948 to 1954 they were restricted to the counties of the promoters. The West Riding, Nottinghamshire, Essex, Berkshire and Derbyshire got powers to carry on this kind of function within their own counties.
There was then a change in the form of power granted. From 1954 to 1964, although Devon, London and Durham were fairly restricted in the areas in which they could operate, Monmouthshire, 104 Hertfordshire and Cumberland sneaked a Clause through, if I may put it that way, so that they could combine in trade with any local authority anywhere in the country. That was spotted when we got to the Manchester Corporation Bill in 1965, and the restriction has swung back again. The Manchester Corporation Bill had schedules in it clearly setting out the authorities which can agree together under these provisions. Generally speaking, since 1965, although there have been a couple of Bills giving the wide power to enter into agreements with any local authorities, they have been restricted to the local authorities of the county of the promoting authority of the Bill or the neighbouring counties.
The same pattern has emerged regarding the definition of "public authorities?. It is proper for local authorities to cooperate with public authorities within their districts—the police authority, the university authority, the hospital authority, the river authority, water boards, and so on. But if the Bill is to go on to the Statute Book, it is essential that it should not authorise local authorities to set up a national purchasing body. There must be some restriction on the area within which these agreements can be made. Obviously this part of the Bill needs amending.
Reading the Bill as it stands, I wonder how the Minister can dare to come to the House and ask for the power to give leave and licence to any local government body—even the Council of the Isles of Scilly—to set up a national purchasing body. How silly can we get? Surely, the Government do not intend this. If they do, then we should throw out the Bill at once. There should be this restriction on the area in which agreements can be made.
If a national body was set up by a local authority or by any public body, that authority would escape selective employment tax. I think that we should have an assurance from the Joint Parliamentary Secretary, if he seeks the leave of the House to reply, that there will not be this unfairness in trading between local authorities and private enterprise over S.E.T. if the local authorities exercise their powers under the Bill. I want to stress that I should strongly object to a countrywide organisation being set up.
105 Clause 1 states:A local authority and any public body within the meaning of this section may enter into an agreement for—(a) the supply by the authority to the body of any goods or materials …The agreement can be made generally by the local authority with any public body which the Minister cares to define.
My hon. Friend the Member for Worcester (Mr. Peter Walker) said that we would ask for a Statutory Instrument defining these powers. I will spell that out a little more. We shall seek in Committee, if the Bill receives Second Reading, to provide that the powers in Clause 1(1) are granted, not directly in the Bill, but by the Minister, by Statutory Instrument, to the local authority or group of local authorities asking for them, and that such local authority or group of local authorities must justify the request to the Minister in the same way as in the past it had to justfy it to Parliament—in a Private Bill.
The Minister should be under an obligation to see that the request is for an appropriate district and appropriate authorities. In particular, local authorities should not be given carte blanche to supply public authorities which trade, or resell goods, or hire for reward, and so on. My hon. Friend the Member for Worcester mentioned two such authorities, the National Coal Board and the Passenger Transport Authorities. The chance of this sort of agreement being made, which might be translated into extensive trading by a countrywide authority, should be removed from the Bill.
I propose, now, to consider some of the objections which have been made during the debate to see whether we can overcome them by proper amendments to the Bill. One of the most important is that arising out of some of the disasters which have come from direct labour undertakings during the last few years. My hon. Friend the Member for Poole (Mr. Marion) mentioned this particularly. Direct labour went seriously wrong when the Government ordered local authorities to abandon the need to obtain tenders, that: is to say, when Circular 50/65 was withdrawn.
§ Mr. Page
From his experience the hon. Gentleman made a valuable contribution to the debate, and he has now proved my point that these matters, or at least part of them, should be tested by tender. The right course was adopted in that case, where the hon. Gentleman was asked to advertise for tender 40 per cent. of the houses. We should introduce into the Bill, in some form, the need for local authorities to test this form of trading by sample tenders on some of their work. That would to some extent overcome the dangers which some of my hon. Friends see in the extension of direct labour undertakings.
§ Mr. James Dempsey (Coatbridge and Airdrie)
Would the hon. Gentleman agree that in certain county areas it is not possible to get other building contractors interested, and that under those circumstances there is no alternative to asking direct labour to undertake such important work?
§ Mr. Page
I am sure that that is so. I am not suggesting that one should use this provision foolishly. Where tenders are of no value, obviously it is no good asking for them, but there should be some provision for testing the work by periodic tenders outside the circle of local authorities concerned.
The fear was also expressed that this type of agreement would show a loss to the ratepayer, that his money would be used to bolster combined operations of this sort. My hon. Friend the Member for Blackpool, North (Mr. Miscampbell) spoke of the need for accountability. I see no reason why there should not be an obligation to provide separate accounts of these activities so that the public can see that the proper overheads have been charged, and so that, as my hon. Friend the Member for Northants, South (Mr. Arthur Jones) said, the thing is properly costed and that it is all above board and open to criticism. Perhaps the Minister will give an undertaking that this will be done by circular. I do not think that it calls for an Amendment to the Bill, but, if it does, we shall 107 seek to make it during the other stages of the Bill.
The fear was also expressed that local authorities would go outside their normal functions in these combined operations. That fear is worth expressing, because in all the Private Bills where the House has granted this power the Clause starts with such words as, "For the better performance of their functions". That phrase does not appear in the Bill. As an example of what I mean, the Nottingham County Council Act of 1951 says:The Council may purchase, store, and supply to an authority any goods or materials required for the discharge of the functions of that authority…and so on. Words such as those are included in every Private Bill in which this power has been granted, restricting the power as one purely and simply for the functions of the local authorities.
That emphasises the need to define properly any other "public body". We do not want local authorities to buy to supply goods to some national public body; to a local one perhaps, for which the local council has some responsibility, but not a national public body.
A real fear has been expressed that there will be a lack of skill in carrying out the purchasing operations, and a lack of the proper expertise. At the moment one cannot see that the trained men are available for this work. It is true that some local authorities have expert men to carry out this work, but that we must be careful to ensure that, as my hon. Friend the Member for North Fylde (Mr. Clegg) said, there is no empire building just for the sake of empire building. Before a local authority tries to exercise the powers set out in the Bill, the Minister should be assured that that authority really has the experience to carry out the work. If the Statutory Instrument procedure is adopted, that is one of the things about which the Minister should satisfy himself before agreeing to the Statutory Instrument being made. The hon. Member for Bethnal Green quoted the Joint Review Body's report and said that great savings could be made, but they can be made only if the job is carried out by people who really know how to do it. This is essential for the successful operation of the Bill.
108 Expertise is also needed in what the hon. Member for Bethnal Green called organising demand, which I understand is really standardisation. The hon. Gentleman referred with great delicacy to the standardisation of ceramic sanitary ware. I do not think it would be unparliamentary for him to have called it "the common loo". It is not always desirable from the aesthetic, or even from the physical point of view to have standardisation in that type of ware, but at least it is advantageous from the economic point of view. One needs the experience and the brains to know how to carry out this standardisation, instead of going wild on standardising things which are better not standardised.
§ Mr. Hilton
The hon. Member has mentioned several of my arguments but I want to clear up a point that still bemuses me and has not been dealt with by him. Why did a Conservative Government give the largest local authority in the world precisely these powers without any of these dangers being mentioned, while judging it right not to give such powers to local authorities outside the Greater London area?
§ Mr. Page
Everyone had those dangers in mind in giving powers to the greatest local authority in this country—the Greater London Council. It was for that council's predecessor to justify its claim when it brought a Private Bill before Parliament, because the Private Bill giving the powers came before the Public Bill. The London County Council had these powers before they were granted in the London Government Bill of 1963. It is a question of justifying them for any area and seeing whether the type of local authority concerned requires and is capable of carrying out the work.
The Bill gives these powers wholesale. We are not discussing the question whether the local authority to which we are giving them is fit to use them, or whether it is covering the right area. That is why I say that they should not be given by the Bill but by Statutory Instrument under the Bill when we have considered the area covered. In London it was obviously right in terms of the area, and it was obvious that the authority was wealthy enough to put them into operation.
109 The last objection was that we should wait for Maud, on the supposition that if Parliament adopted the Report of the Royal Commission the ultra vires rule might be abolished—that local authorities would be entitled to do as they pleased and, therefore, to do what the Bill tells them they may do. Unlike my hon. Friend the Member for Blackpool, North, I hope that that day will never come. I would much prefer local authority powers to be properly defined rather than for local authorities to be told what they cannot do. That is a personal opinion.
It will be a long time before Maud comes into the garden. We shall have to wait for some time before we know what will happen in terms of the structure of local government. In the meantime there may be some savings, and they can be made without damage—but only if the Bill contains the necessary safeguards. Much legislation will need to be amended when Maud is implemented. This Bill will be a mere drop in the ocean of amended legislation when we deal with the Report of the Royal Commission.
I can summarise the Opposition's attitude towards the Bill—I acknowledge the shades of opinion expressed by my hon. Friends—by saying that we want to give local authorities the efficiencies and advantages of the big customer in commerce, industry and the professions. But we want to ensure that in seizing these advantages the local authorities first have the expertise to carry out purchasing and distribution as contemplated by the Bill; that they do not throw away the ratepayers' money to the injury of the ratepayers or the damage of the ordinary trader; that they do not set up national monopolies, but each will be restricted to local authority functions within the appropriate area for the exercise of those functions and, finally, that they concentrate on the benefits to their partners in this proposed group, and not upon empire building on the part of any one of them.
§ 7.34 p.m.
§ Mr. Skeffington
With the permission of the House, I should like to reply to some of the points that have been made. I am pleased that, on the whole, the Bill has, been welcomed. The welcome 110 has been somewhat tepid in some quarters, but I do not object to that because proper points have been made by all those who have spoken, and they will have to be considered seriously in Committee and in later stages. Nevertheless, my duty to the House in asking it to give the Bill a Second Reading is not to disrupt harmony or store up debating points; it is to try to answer as well as I can the many interesting questions that have been asked.
I am glad that a number of pleasing references have been made to my hon. Friend the Member for Bethnal Green (Mr. Hilton), because it must have been disheartening for him, having been successful in the ballot and having spent a great deal of time on the Bill when, having presented it, not only was a decision not able to be reached but although he came here Friday after Friday hoping that the Bill would get through on the nod there was always somebody here ready to shout "Object!" My hon. Friend will realise, as we all must, that the work that we do is not always wasted, and that blossom from the seed we sow may come some time later.
The hon. Member for Worcester (Mr. Peter Walker) raised four points, which were repeated by other Members. As the Report of the Joint Review Body emphasised in paragraph 16 and elsewhere, it is not merely a matter of trying to secure the economies of bulk purchase automatically. There are great savings to be made there; that is probably beyond dispute. But bulk purchase will yield its dividends only if it is in the hands of an expert organisation, or expert personnel. This is as important as the economies that we hope to secure from the bulk purchases themselves.
I hope that as a result of this Measure—if the House is good enough to give it a Second Reading—departments and experts will be able to provide their expertise over a wider field. It is not suggested here, or in the use of computers, that more and more central purchasing departments or large and expensive computers should be set up. There may be a case for more, but the heart of the matter is their better use. We must see that where personnel and equipment are still available, they are used as well as may be.
111 The hon. Member for Worcester mentioned the need for overheads to be properly charged in the price of a service. I agree. That is what happens now. When an authority provides a service it covers its costs, which include not only the cost of the materials but the cost of all the necessary administrative work connected therewith.
The hon. Member talked about the cost of storage, and hoped that this would not mean that a local authority having these powers should stockpile vast accumulations of goods for long periods. As the hon. Member for Honiton pointed out, in total there may be even fewer stockpiles than there are now, but they will be more widely and regularly available, perhaps with a greater range.
But the House must not forget that in all these matters there is the question of the general financial control exercised over local authorities by the district auditor. Undoubtedly, a heavy frozen stock would be the subject of an adverse report from the auditor, with all the necessary consequences, which might lead even to a serious position for those who had authorised the maintenance of the stocks.
Some concern has been expressed about maintenance. I am willing to consider in Committee whether further qualification is necessary. In Clause 1(4), where maintenance is clearly defined, the word "minor" is used:'maintenance' includes minor renewals, improvements and extensions;That word carries out the principle of the Report and the requirement of the local authorities.
§ Mr. Costain rose—
§ Mr. Skeffington
I may be able to save the hon. Member's intervention. I have said that I am prepared in Committee to see whether further definition is needed. I am not being doctrinaire. The Bill is only trying to do what the Report required us to do. If a further modification is needed, we shall consider it.
Several hon. Members asked whether a public body could be a national body like the National Coal Board. Within the terms of definition here, I do not think that a corporation conducting its own vast powers in that way would be the subject of a Ministerial Order of the 112 kind which the Bill proposes. The fears here are probably illusory, but again I am prepared to consider this point in Committee. Certainly the Committee must assure itself that what we have proposed does not lead to an absurd extension which no one requires. I hope that we will not have great difficulty in agreeing on that point.
The hon. Member for Crosby (Mr. Graham Page) asked how far we could usefully define the area over which one local authority could provide services to another and how far special accounting arrangements were necessary. These points should be investigated, but I hope that we will not forget that these powers will be administered by responsible local authorities. We are always saying that local government should be as free as possible of central control. We have already made a number of legislative alterations which free local authorities from central Government control, and have extended under the Town and Country Planning Acts those matters which no longer require Whitehall control.
While it is proper for the hon. Gentleman to express his concern, I hope that he will not start thinking that the objective of the Bill is to treat local authorities as though they were not responsible bodies which have been doing this work for many years. This is a question of balance. Much will depend on the attitude which the Committee takes to the trust which we should be able to repose in local government.
The hon. Members for Poole (Mr. Murton) and Crosby asked why these matters have come forward now. The question has been asked why, even if the Bill is desirable, it is desirable as soon as possible. When we discussed this matter two years ago, we were told that we should wait for Maud; now we are told that we should not do it before the local government reorganisation takes effect. When we have the local government reorganisation, I wonder what the pretext will be for not having this Measure. I am doubtful of the wisdom of putting off a Measure if it should be done.
This is not anti-Maud, because hon. Members who study Maud as they do their Bibles will be aware that, in paragraph 560, it asks the existing authorities 113 without delay to rationalise their administration as far as they can, so that they will be preparing for the future and making the existing system work much better. However rapidly the Maud proposals or something like them are translated into actuality, this is bound to take two or three years at the very quickest. Why should local authorities and the ratepayers lose the advantages of this Measure in the meanwhile? Judging from their speeches today, many hon. Members probably regret that local authorities did not have these powers two years ago when my hon. Friend introduced his Bill.
The hon. Member for Poole was obviously unconverted by my argument about ultra vires, in our discussions two years ago, although on that occasion the hon. Member for Crosby agreed with my view. If there was no purpose in having these powers, we would be wasting the time of the House. Any Private Bill of the character which many local authorities now have would not have got beyond the preliminary stages if it could not prove that the powers were necessary. The fact that we have had 31 or 32 such Measures in the last 30 years or so is some indication of that fact.
The matter goes deeper than that. There is case after case, not necessarily referring directly to the purchase of materials, but to the ultra vires doctrine. It seems that local authorities are looking over their shoulders all the time if they engage in something of this kind for which they do not have explicit or implicit authority under statute.
King v. Dolby, 1902 has dominated case law in this field. It was an example of the very point which the hon. Member made, that, if an authority is doing something which saves the ratepayers money, this must be reasonable, providing that it is its normal function. In this case, East Ham Urban District Council, as it then was, purchased, I believe, a second-hand omnibus to convey its members about the district instead of paying their tram fares. This was undoubtedly cheaper, but they were challenged and the matter went to the High Court. I believe that the Lord Chief Justice asked many questions about what horses were being used, which was not a major point at issue. They 114 apparently used the horses of the fire brigade.
But the point was that the Council had no right to purchase or repair the bus over which this case arose. The individual overseers were surcharged £13 each, although they proved that what they were doing saved the ratepayers money. Ever since that case, authorities have been doubtful, if they have not had this explicit or implicit power to undertake services. I could quote to the hon. Member numerous cases in which the ultra vires doctrine has worked as I have described.
I have made inquiries of the District Auditors' Inspectorate. We know that clerks, who are usually wise and learned in the law, frequently advise their councils not to undertake this or that service because they may not have the authority to do so. I know of cases when a clerk has advised his authority not to allow its computer to be used for another authority for that very reason. The Lancashire County Council made a kind and wise gesture to help district councils professionally with accountancy expertise, but the county council was advised by its clerk that this might well not be legal. That was why the county council sought the appropriate powers in its own Measure. It is worthwhile spending a moment to place this on record. If we want these services to be provided, it is right to give councils the protection of legal authority, otherwise they certainly will not be done.
The hon. Member for Maidstone (Mr. John Wells), who apologised that he could not stay for the whole of the debate—as did the hon. Member for Worcester; I appreciate their courtesy—raised the point that a joint arrangement of this sort might add to staff. That would be a very odd result and one to be watched. It is the last thing that one wants to happen. The hon. Member for Maidstone made a number of points on horticulture, of which he is a doughty defender, and we look forward to his proposals in Committee. I am glad that he placed on record what the Kent County Council has done, because it has for some time done very well the things that we have been discussing.
I listened with appreciation to the points made by the hon. Member for 115 Honiton (Mr. Emery). I was glad that he put his figures on record and I was glad also to have his support. We will certainly consider definitions to ensure that the fears expressed to the hon. Member can be shown to be groundless.
The hon. Member for North Fylde (Mr. Clegg) asked a number of lawyers' questions, to which, I am certain, he knew the answers. The fact is that there is nothing in the Bill which alters the legal relationship between the parties in any of the matters dealt with by the Bill. One local authority will be able to sue another in the same way as it can sue a contractor. There is nothing to worry about there. Many authorities, if they have arrangements of this kind, may well work out insurance principles and cover themselves. That, however, is a normal matter and there is no difficulty there.
In an interesting speech, the hon. Member for Northants, South (Mr. Arthur Jones) asked why new building was not covered. The hon. Member answered his philosophical points at the end of his speech when he expressed the view that this was a sophisticated or underhanded way of extending the Socialist principle of collectivisation.
Building is not included because we did not want the Bill to extend further. We merely wanted to do in the Bill what the Report has advocated and what the local authorities want. That is why we have limited what we now seek to do by Statute but with the proviso that local authorities will be able to help other authorities and public bodies. It is precisely for that reason that the Bill is not being used for doctrinaire or philosophical considerations of that kind. To embark upon using direct labour departments for new building might be highly desirable, and a good case could be made, but not within the framework of this modest Bill. That is the answer to the hon. Member.
The hon. Member for Northants, South also asked why there could not be provision for competitive tendering. This is a matter for local authorities. Of course, they can do so. In some cases it may be worthwhile. In many cases, the kind of maintenance that we are talking about is where a county council, for instance, has 116 a site on which a building needs repainting but its depot is 50 miles way. In those circumstances, it is sensible to use the district council to cover that kind of case. In view of what I have said, I hope that the hon. Member will realise that that is the position and that I have allayed a great many of the fears to which he and others have probably referred.
§ Mr. Graham Page
If I may refer to the point about direct labour and tendering, would not the hon. Gentleman think it proper periodically to test all these powers against tenders from private enterprise by, for example, devising a scheme whereby the exercise of these powers could be tested for their economy as against outside tenders?
§ Mr. Skeffington
There is probably a great deal to be said for an objective test of that kind. My only doubt is that to impose such an obligation in the Bill would be a limitation upon local authorities and would take away from them the kind of status which, I thought, the House now generally agreed should belong to modern authorities. This goes to the whole point of the ultra vires question.
I am anxious that the Bill should not be so cluttered up with safeguards that local authorities do not think it worthwhile to use its provisions. I do not think that a local authority has anything to lose by checking from time to time that what it is doing is the most efficient, effective and economical way of doing it. If it found that it was wrong, it would have to revise its methods.
§ Mr. Emery
Is it not the case that any proper supplies department normally has vendor rating which does precisely that, looking at all the possible bids and rating the vendors to ensure that it has the best buy? This is one of the reasons why one wants a larger department to be able to carry this through.
§ Mr. Skeffington
I said in opening that the practice of local authorities in doing this work has proved again and again that they test the market and accept the scheme which, in the end, gives them the best economic return. Obviously, anything we can do to encourage that we ought to do, whether it is done by circular or by other measures.
Again, however, I must ask the House to remember in the background all 117 the time that there are the overall financial controls under which local authorities operate and that there is the possibility of challenge by any elector in the area. These are powerful weapons already. I hope, therefore, that the House will not feel that we are taking a great leap into the unknown. That is not what we are doing.
The hon. Member for Crosby asked whether the Bill might not be an extension of the powers of local authorities. I cannot see how this fear can be justified because all that the Bill does is to make legal shared services or actions which a local authority now has to perform for others. Of itself, the Bill adds no powers. It merely states that the activities can be more widely used. I am glad that the hon. Member made the point because there is misunderstanding about this outside the House. The Bill adds no new powers in that direction.
I am grateful for the valuable and constructive points which have been made. I hope that I have answered them all and I look forward to seeing many of the hon. Members who have participated in the later constructive Committee stage.
§ Question put and agreed to.
§ Bill accordingly read a Second time.
§ Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).