Danny Alexander (Shadow Minister and Disability Spokesperson, Work & Pensions; Inverness, Nairn, Badenoch & Strathspey, Liberal Democrat)

I beg to move amendment No. 40, in clause 15, page 12, line 38, leave out paragraph (c).

The amendment relates directly to the previous debate on the powers proposed in clause 14. The amendment—a probing amendment designed to elicit more details about the Government’s intentions—seeks to delete the provision that allows contracted-out parties to carry out functions under the clause in making the sort of directions discussed previously.

By way of a preamble, let me say that I welcome the Government’s general approach to contracting out. There is an enormous amount of evidence, from a variety of organisations. I have mentioned them before, but I do not apologise for mentioning them again. There is the SHIRLIE project in my constituency, right the way through to national providers. I have visited the Working Links project in the Parkhead ward, Glasgow, a tremendous neighbourhood scheme not only for people on incapacity benefit, but for a range of people who find themselves excluded from the labour market.

The Government’s approach is absolutely right: it makes use of skills and experience in the private and voluntary sectors to deliver the kind of back-to-work help that the Bill proposes. I must say, in passing, that it is a shame that the Government have not gone further. In our previous sitting, we discussed the fact that although 60 per cent. of pathways areas have been led by contracted-out parties, 40 per cent. are still led by Jobcentre Plus. I hope that Ministers may review that split in a few years’ time, once the schemes have been rolled out and have been seen to work. Such a review could be conducted on the basis not of the views of Jobcentre Plus staff about their own performance, but of an objective assessment of the performance of different contracted-out parties.

The area of controversy in this clause is the degree to which the powers in earlier clauses, particularly those relating to conditionality, should also be given to the contracted-out parties, the voluntary and private sector organisations that carry out this work. Later amendments will draw particular attention to the powers that relate to sanctioning, so I will not burden the Committee with them at the moment. The powers in clause 14 allow the Minister to make directions about what may or may not be counted as work-related activity. We want to probe the Government’s intentions on the provision that would allow contracted-out partners to make those same directions. Contracted-out organisations could make directions to individuals about what should or should not count as work-related activity.

Can the Minister clarify the circumstances under which private and voluntary sector organisations will use that power? What mechanisms of accountability will be in place to ensure that people can complain or appeal if necessary against such directions? Will that complaint or appeal be to the organisation to which that work is contracted out, or will they have a right of  redress to Jobcentre Plus or another Government body? The Bill allows for powers to be exercised differently in different localities. The city strategy was mentioned by the Minister in previous debates. Will the claimants who have been subjected to a direction under clause 14 by a contracted-out party, which may be different from a similar direction issued in another area of the country, have the power to appeal? We have already had a debate on the powers and I look forward to the Minister’s response.

Jim Murphy (Minister of State (Work), Department for Work and Pensions; Renfrewshire East, Labour)

I am delighted to see you in your place again on this warm and sunny morning, Mr. Amess. The hon. Member for Inverness, Nairn, Badenoch and Strathspey has already alluded to the weather; we seem to have a running commentary on London’s weather in this Committee. I am comfortable with that. If he ever wishes to move away from carrying the burden single-handedly of his whole party in this Committee, he may apply for the job of BBC weatherman. I note that on Thursday morning when talking about looking forward to going home to Inverness he said:

“I will be confronting storms, snow, ice and all sorts of other things when I return to my constituency this evening”—[Official Report, Standing Committee A, 26 October 2006; c. 233.]

Anyone who lives in the northern part of this kingdom and saw the TV coverage over the weekend will know that that was an understatement.

It is a bright and happy morning for another reason. The Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Stirling (Mrs. McGuire), has reason to celebrate because she became a grandmother for the first time over the weekend. She is a very young grandmother to a baby girl called Orla. I congratulate her on that fantastic news.

Tim Boswell (Shadow Minister, Work & Pensions; Daventry, Conservative)

May I relay a message from the Opposition to say that those of us who already have the privilege of being grandparents welcome the Under-Secretary of State to the club? It is one in which all parties may join with equal delight. The only amazement in my mind is that she could possibly have qualified for it.

David Amess (Southend West, Conservative)

Order. Perhaps I might be allowed, on behalf of the whole Committee, to express our pleasure that the Under-Secretary of State has become a grandmother.

Jim Murphy (Minister of State (Work), Department for Work and Pensions; Renfrewshire East, Labour)

I did not think that I could be outdone in my obsequiousness to my hon. Friend. I am sure that young Orla, as she grows up, will be given a transcript of these proceedings as a keepsake. I hope that it does not have too much of an impact on her in later life.

I shall deal with the points raised in the probing amendment, but first I thank the hon. Member for Inverness, Nairn, Badenoch and Strathspey for his comments about the Government’s general approach to contracting out, which we will have an opportunity to discuss in more detail later in the clause. He is right in saying that it is important that we harness the creativity, skill and experience in the private and  voluntary sectors as we roll out pathways and other labour market interventions and welfare to work services. It is increasingly important that we utilise the capacity in the private and voluntary sectors.

On the probing amendment, we believe that, in the contracting out of such services, private and voluntary sector organisations should be given the full range of tools available to help and encourage people into the right kinds of training and support. Through the experience of Jobcentre Plus and Jobcentre Plus-led pathways, we know that personal advisers can strike up a close working relationship with the customers that they advise.

It is important that we retain the power in clause 15 because the detailed knowledge of customers’ circumstances and support needs and other inside information that the personal advisers can obtain and reflect on, puts them in a strong position to make a decision on whether a particular work-focused activity would be ineffective or inappropriate for their customer. That applies whether the personal adviser works within the Jobcentre Plus or private and voluntary sector pathways.

The decision to apply a direction in itself will not lead to sanctions. It is important to put that on the record and I think that my hon. Friend the Under-Secretary of State alluded to it earlier. The decision to apply a direction is completely separate and has separate appeal rights. Removing the ability of personal advisers employed by contractors to apply directions would place an administrative burden on the contractor and Jobcentre Plus requiring further complicated hand-offs and transfers of information, which would delay decision making and increase the chances of mistakes. So it is important that we have that consistent process from end to end.

Of course, we will need to ensure that such directions are applied consistently and fairly and we will work with providers to ensure that that is indeed the case. Furthermore, regulations will set out clearly exactly when directions can be used, but it is in the best interests of claimants that directions be applied by the organisation that has day-to-day dealings with them.

We note the hon. Gentleman’s comments on the right mix of Jobcentre Plus and private and voluntary sector provision of pathways. That is part of a continuing conversation on the right mix between public sector-led and private and voluntary sector-led employment programmes. We do not have a dogmatic approach and will review the evidence on the most effective ways in which to support people to enable them to return to the labour market. Jobcentre Plus-led pathways have been successful. We anticipate that roll out in the private and voluntary sectors will use available capacity and that could be even more successful.

Tim Boswell (Shadow Minister, Work & Pensions; Daventry, Conservative)

Without prejudice to the Minister’s remarks, or indeed to the views of my colleagues, will he reassure the Committee that if, for some reason, there were a deficiency in the private sector provision—I am not talking so much about the quality of the provision, but actioning the applicants who come forward—the Government would introduce those programmes throughout the country, if necessary  by additional public provision? For the avoidance of doubt, I am not canvassing that, but talking about a fall-back power if 100 per cent. coverage were not possible.

Jim Murphy (Minister of State (Work), Department for Work and Pensions; Renfrewshire East, Labour)

The hon. Gentleman raises a reasonable point. Jobcentre Plus would also be there as the last resort to manage market failure, but it would genuinely have to be the last resort, because we anticipate that a more appropriate first, second and third line of management would be through stringent contract management, continuous assessment of management information, penalties that can be built into the contracts, and terminating contracts and awarding them to others. The situation that he outlined is a possibility as a final and last resort, but only if everything else has been tried.

I hope I have reassured the hon. Member for Inverness, Nairn, Badenoch and Strathspey and that he will therefore ask leave to withdraw his probing amendment.

Danny Alexander (Shadow Minister and Disability Spokesperson, Work & Pensions; Inverness, Nairn, Badenoch & Strathspey, Liberal Democrat)

The Minister has amply clarified the Government’s intentions and I beg to ask leave to withdraw the amendment.

John Penrose (Weston-Super-Mare, Conservative)

I beg to move amendment No. 243, in clause 15, page 12, line 38, at end insert—

‘(1A) No person may be authorised to exercise the functions specified under subsection (1) unless he has demonstrated such understanding of disabilities or health conditions, and of the employment support needs of persons whose capability for work is limited by their physical or mental condition, as the Secretary of State shall by regulation require.’.

I start by not living up to the tradition of the Committee and making an observation on the London weather. In my constituency, Weston-super-Mare, the sea is always clear and blue and so is the sky, and if anyone would like to visit for a holiday they will be very welcome.

David Ruffley (Shadow Minister, Work & Pensions; Bury St Edmunds, Conservative)

That is his local press release.

John Penrose (Weston-Super-Mare, Conservative)

There we are; I’ve been spotted.

The purpose of the amendment is clarify the proposal and, most importantly, to emphasise the importance of the quality of the individuals and organisations that will have contracts with the Government, and to probe how the Government plan to contract with those organisations to ensure that there are enough individuals and organisations of sufficient quality—a proper supply—with whom to enter into contracts. How the Government behave in their commissioning process will have an enormous effect, either constructive or destructive, on the availability of people who have the necessary skills and qualities to deliver the services we are discussing.

It is worth while pausing to reflect on how complicated that commissioning job will be if there are to be enough people of sufficient quality to deliver the services. For a start, the range of conditions that have to be catered for is enormous: it varies from people  with mental health conditions to those with severe physical disabilities and everything in between; geographical variations throughout the country also have to be dealt with. The local employment market in Weston-super-Mare may be hugely different from that in Glasgow, Doncaster and elsewhere, so the ability to find suitable work-related activity for people in each area will also vary enormously.

The variety of organisations that have to be contracted with is enormous, too, which makesit even more difficult. It varies at one end of the spectrum from large private organisations such asReed in Partnership and WorkDirections, through comparatively large and extremely successful third-sector organisations such as the Shaw Trust, right down to myriad highly successful, very small local organisations that often focus on a particular niche in a local employment market.

Adam Afriyie (Windsor, Conservative)

Does my hon. Friend, who, like me has experience of the private and voluntary sectors, share my anxiety about what would happen if one of the service providers were to get into difficulty? There may be hundreds if not thousands of claimants dependent upon that organisation. My concern is what the Government and the Secretary of State would do in response to such a failure when the well-being of thousands of people is at stake.

John Penrose (Weston-Super-Mare, Conservative)

That is a fair and cogent point. There are powers elsewhere in the proposal to deal with some of those issues in extremis if necessary. I am sure that the Minister will respond to the point as he is nodding at me, which will prevent me from having to ask the same question.

The range and complexity of the supply market is great. That makes clear the difficulty faced by any commissioning organisation run by the Government in stitching together a full range of high-quality supply in all areas of the country to satisfy all the different employment local markets and to cope with all the different incapacity problems and conditions which have to be dealt with as part of this Bill.

A year ago this was proving so difficult that it was extremely problematic. I know the Minister will tell us that things have improved significantly since then but I think it is worth while pausing to note some of the comments made by some of the organisations with which the DWP was contracting. A number of them came to give evidence to the Select Committee on Work and Pensions on 18 January and I would like to put on record a couple of the comments that give a flavour of the scale of the problem between the Government and the organisations they were contracting with just a year ago.

For example, the representative of the Association of Chief Executives of Voluntary Organisations, Stephen Budd, said to the Select Committee:

“The good news is that the procurement process is so bad that even small changes would be very effective.”

He went on to say:

“The effective price is not based on full cost recovery. There is excessive bureaucracy and the contract is almost always one year.”

“Those contracts are not effective so it costs the taxpayer money. They are not efficient in terms of their outcomes and, if you changed the contracts, you could get better quality outcomes. They are a nightmare for organisations to operate and also excessive bureaucracy has a cost back on the Civil Service.”

Jeremy Hunt (Shadow Minister (the Disabled), Work & Pensions; South West Surrey, Conservative)

Does my hon. Friend agree that one of the most critical problems in these contracts has been their length? If we have short contracts, for example, a one-year contract, the management of the private or voluntary sector organisation have to spend most of their time and most of their effort trying to re-secure the contract for subsequent years, which is where all their money is coming from. Will he join me in urging the Minister to listen to the feedback about the length of contracts, so that we have more realistic periods of time?

John Penrose (Weston-Super-Mare, Conservative)

I agree with my hon. Friend’s characterisation of the problem. However, that has an impact not just on the contracted organisation, but on the commissioning organisation, which has to spend an enormous amount of time dealing with the yearly rollovers as well. It is, therefore, a problem on both sides of the fence.

To illustrate the last point, Mr Budd went on to reveal some results from a poll of members of his organisation who were involved in DWP contracts. They were asked whether contracts were fairly priced and 62 per cent said no. They were asked whether the contracts involved a fair sharing of risks between the Government and the contracting organisation and 92 per cent said no. They were asked whether there was excessive bureaucracy and 93 per cent said yes. To answer my hon. Friend’s last point, they were asked whether the contracts were long enough and 71 per cent said no.

The killer was the final question about the number of people of sufficient quality for the Government to contract with. Those organisations were asked whether they had to close some services in the past two years as a result of contracting with the DWP. Two thirds said they had to do that.

There was also the Centre for Economic and Social Inclusion, whose representative, Dave Simmons, said on the same day to the Select Committee:

“There was a general, almost institutional, lack of trust between Job Centre Plus and its providers. This was exemplified in an almost over-specification of ‘this is exactly what you must do at this time’.”

He went on to say:

“Job Centre Plus needs to step back from that command and control mentality and they need to start thinking about who their supply chain is and not take them for granted. If a big company treated Job Centre Plus customers in the same way, there would be all hell to pay.”

His final comment was:

“I think Job Centre Plus and other funding bodies have yet to realise the strength of these organisations and that they should be using them in partnership and not in a directive way.”

That illustrates the difficulties that have obtained. I know the Minister is going to give examples of changes that have improved the situation, but it is instructive to  realise that, for the reasons I have given, the commissioning job is extremely complicated and will require a great deal of care and attention in order to deliver the universal services, varied for people across the country, that will be required.

Tim Boswell (Shadow Minister, Work & Pensions; Daventry, Conservative)

I have been very taken by the examples my hon. Friend has quoted and the evidence given to his Committee. It would be helpful if the Minister could say a word or two about the way in which the procurement function in his Department has been changed—there is a director of procurement who seems to have cleaned things up to some extent—but particularly in relation to contracting with the private sector, which is cardinal for the whole success of the policy?

John Penrose (Weston-Super-Mare, Conservative)

I thank my hon. Friend for giving me a great lead into my next points. It is vital to look at how things need to change and what best practice should be. I hope that the Minister can give us examples both of what has happened since the period to which those quotes referred and what he expects to happen in future. We are dealing with a complicated situation, yet we have a series of commissioning decisions and activity that, at their worst, seem to be better suited to a commodity market, where things are primarily decided on price, rather than on the quality of the service and the variety of the service being provided. It also seems better suited to a series of large providers which can cope with the bureaucratic demands that are being made upon them and are big enough and serious enough to be able to stand toe to toe and eyeball to eyeball with an organisation of the scale of the Government in a contracting negotiation.

Clearly that is not the sort of organisation that we have—I have just described some of them. Many are led by inspirational individuals, employ five or six people and focus on, for example, dealing with the employment problems of people who are partially sighted in Doncaster. That set of behaviours has to change if the Government are to achieve their central aim of developing capacity and the ability of the organisations that are providing those services to grow and to provide yet more services in future.

The Government have already accepted the notion that there is not sufficient capacity out there atthe moment. They have said that they will have the equivalent of a mixed economy in that they are expecting to provide some services in future via contracting and contracted-out organisations. At least to start off with, a proportion of the services will be provided by public sector employees in the same way as the pathways to work pilots have been. That is an acceptance of reality and makes enormous sense.

If the Government want to expand the amount of contracting at any point in future, they cannot do so unless they have taken the necessary steps to improve their commissioning to build the capacity of those other organisations. That will mean satisfying some of the proposals contained in a report from Oxford Economic Forecasting in late 2005 commissioned by the Employment Related Services Association. It made several recommendations. It said that, when contracting with people, the DWP should avoid overly short small contracts and protracted decision making,  that it should allow sufficient time for implementation and that it needs to rebalance the risk between procurers and providers. I would add that it is probably vital, if we are to grow capacity, that contracts are priced fairly. We are talking about public sector money and we have to get value for money. Care needs to be taken that we are not pricing things at the marginal cost. They need to be at full cost if we expect any of these organisations to grow successfully.

David Ruffley (Shadow Minister, Work & Pensions; Bury St Edmunds, Conservative)

I am enjoying my hon. Friend’sspeech. The Oxford Economic Forecasting report commissioned by ERSA and others made one other startling observation which concerns the public sector procurement process. It gives examples where a contract is put out to tender and once it has been accepted contractually the terms are changed. Quite often these are small, not-for-profit organisations or charities that accept the conditions from Jobcentre Plus. Because of Jobcentre Plus’s monopoly position, they have no choice but to accept what is a contractual variation after they have accepted a bid. Does my hon. Friend agree that that kind of nonsense must be stamped out in order to protect small private and voluntary sector bodies?

John Penrose (Weston-Super-Mare, Conservative)

My hon. Friend is absolutely right. That illustrates the perils of changing contract terms after the contract has been signed and the problems of dealing with a fragmented supply base that includes some larger organisations capable of negotiating with the Government and saying, “That is not an acceptable way to behave and we will not put up with it”. They can do that because they are large enough to cope with a negotiation of equals, but a small organisation led by one or two charismatic and highly able people in a particular local market is not able to do so and ultimately we will be driving them out of business. We will all be the poorer for it.

Tim Boswell (Shadow Minister, Work & Pensions; Daventry, Conservative)

In support of my hon. Friend’s point, does he not agree that it is not in the interests of the public department involved, whether the Department for Work and Pensions, Jobcentre Plus or any other, to set up an equivocal contracting process? In fact, those bidding for a position for contracts, including the larger sophisticated organisations, will have to factor a very substantial premium into their bidding to cover the contractual risk.

John Penrose (Weston-Super-Mare, Conservative)

That is another good example of the problems that the industry was facing just a year ago.

I hope that the Minister is going to tell us that a number of things have been done already or are about to be, such as longer contracts, more careful sharing of risks and rewards between the Department and the people being contracted with, a specification not of process, but of required outcomes and stability of contract. Those sorts of things are essential.

I understand that steps have been taken to put some of those things in place. For example, when giving evidence to the Select Committee, the permanent secretary, Mr. Lee Lewis, said that he felt that the Department was creating a new cadre of specially trained commissioners with the specific skills required  to achieve such things. He was good enough to accept that the skills required for buying or commissioning are not ones that perhaps are traditionally found in the civil service, that it is a departure needing a new set of skills and that the Department was having to develop that.

Mr. Lewis mentioned also prime contractors, which are potentially an extremely effective way in which to simplify some of the difficulties created by the fragmentation of the organisations that have to be contracted with. A prime contractor can subcontract specific types of condition that need to be dealt with or entire geographical areas to other people and smaller organisations in an attempt to get the right mix and variety of provision.

Jeremy Hunt (Shadow Minister (the Disabled), Work & Pensions; South West Surrey, Conservative)

Does my hon. Friend agree that one of the problems with the contracts issued by the public sector and the DWP is that inevitably there is a huge focus on price? That is absolutely scientific and therefore the people issuing the contracts have to pay attention to that and worry that, if they give a contract to someone who is not the lowest-priced provider, their decision could be questioned. On the other hand, in the business world, businesses have greater flexibility to give contracts to those that might not be the cheapest, but are the best. Sometimes, public sector contracting processes do not reflect the flexibility in the business world.

John Penrose (Weston-Super-Mare, Conservative)

I agree completely with my hon. Friend. That goes back to the point that I made about the necessity of not behaving as though this is a commodity market between large consolidated suppliers providing something on the basis of lowest price. We are talking about hugely varied organisations providing hugely varied services. Quality is key and if we do not have the highest possible quality of service, the results will not follow.

Prime contractors will potentially simplify the contracting process dramatically and allow some of the smaller contractors to live with the deal done with an enormous Government Department and to develop their ability to provide those services over time. The danger is that in moving to prime contractors—simplifying the commissioning process and having the ability to stitch together a universal set of varied provision in different parts of the country, taking account of all the relevant conditions—we will shift from a public sector local monopoly to a private or a third-sector local monopoly. Can the Minister reassure us that that will not happen? Will he also please tell us how the Government plan to ensure that there is sufficient accountability and tracking of results, so that we do not end up with monopoly provision and supply in those areas?

Where the Department for Work and Pensions is operating the mixed economy and public sector employees and third-sector or private sector organisations are delivering some of these services, perhaps next door to each other, it is important to know that the different organisations will be treated equally. There should be a level playing field for public sector organisations and private or third-sector  organisation providers. If that is not the case, the contractors cannot be sure that they will be given a fair crack of the whip relative to the public sector organisations that will also provide the services. It will be extremely difficult to persuade them to step up and enter into these contracts if they feel that they are the least-favoured organisations and that there is a preferable in-house deal that others will get. It is vital that we have reassurance from the Minister on that point.

I shall now return to the point about pricing made earlier by my hon. Friends: how can we be sure that we obtain not just the best-value price, because we are dealing with public sector money, but that we provide enough of a price for these organisations, many of which are extremely small, to grow and to provide effective services across a wider range of areas, building on their existing geographical base? How can we be sure that they will get enough money to develop in that way rather than being asked to set a marginal price or have the terms of their contracts changed, and therefore have resources sucked into unproductive work instead?

We seek clarification and reassurance from the Minister because if these things are done properly, there will be many more high-quality organisations to contract with. The people who are being helped through work-focused activities do not care whether something is done by a public sector employee, a private sector employee or a third-sector employee; they just want to know that the service they get, by whatever route and whoever delivers it, is of the best possible quality and stands the best chance of getting them closer to the world of work.

David Ruffley (Shadow Minister, Work & Pensions; Bury St Edmunds, Conservative)

I will avoid any meteorological references in welcoming you to the Chair, Mr. Amess. I want to focus on the meat of amendment No. 243, the purpose of which is to ensure that contracts for the delivery of assessments and work-focused interviews, among other things, are awarded only on condition that the contractors, whomsoever they may be, have relevant knowledge of disabilities and health conditions that may affect the customer and the general employment support needs of the client groups. The interests of the work-related activity group and the support group must be protected and the amendment goes some way to delivering that objective.

Without the safeguard in the guts of the amendment, some contractors delivering key elements of the Bill might not have as much expertise in disability, health or employment support as the Committee, Ministers and customers would wish. The amendment would ensure that potential contractors would have to demonstrate, at the phase of tendering for the contracts that are the subject of the clause, an awareness of, and expertise in, the issues to which we have referred—both employment and health and disability. The Government would use that knowledge to come to the best decision as to who should be given the contract. Unless we get that right, it will not just be bad public policy and bad for the taxpayer but, worst of all, it will be bad for the customers.

We must ensure that the contractors are of the very highest quality. They will all be coming to the process wanting to deliver a good service for the Government,  and not to fail commercially. However, it is not clear to me, after all the negotiations and discussions that I have had with the private and voluntary sector, that the contractors are of uniformly high quality. The amendment would raise the bar.

My hon. Friend gave some of the commercial issues behind the thrust of the clause a good airing, but can the Minister explain how his officials, when they award the contracts in the pathways roll-out and beyond, will ensure that the expertise in health and employment support is there? I do not think that it is good enough to say that the market will decide.

The market is a powerful mechanism to ensure that those who are not much use at doing things fail, and that those who are good at what they do succeed. However, I would not take a risk with the lives of customers who are looking for support and help to get back into work. To put it bluntly, there might be some cowboys out there. The procurement process will clearly weed out quite a lot of the weaker brethren in the private and voluntary sector, who are weaker in the sense that they do not have enough expertise in particular conditions. Obviously, that is what Ministers will want to achieve, but I do not see anywhere here how to tackle the problem of procurement, which the amendment tries to do.

We heard a lot from my hon. Friend the Memberfor Weston-super-Mare (John Penrose) about the inadequacies of procurement, and I do not blame the Ministers full-square for that, because DWP officials and Ministers are undertaking a learning process. They are to be congratulated on the proposition that there should be more contracting out to not-for-profit organisations. It is done now, but we are talking about a huge expansion in for-profit and not-for-profit organisations delivering services. We welcome that, but it is not immediately clear that the safeguards are there, In that spirit of honest probing, can the Minister say something about how specific expertise is going to be built into the tendering process, so that we can all have comfort that the market will not run riot, and that the interests of those most in need of protection are safe?

Danny Alexander (Shadow Minister and Disability Spokesperson, Work & Pensions; Inverness, Nairn, Badenoch & Strathspey, Liberal Democrat)

It is a particular pleasure to follow the hon. Member for Weston-super-Mare, who made an intelligent and thoughtful contribution to the debate. I wish to add a few points to those that he made. The hon. Member for Bury St. Edmunds (Mr. Ruffley) made it clear that the amendment would ensure that people who come forward, wishing to provide services through the contracts that may be issued by the Department, would have a sufficient level of knowledge and expertise in the subject that they are being asked to deal with. However, it is equally the case that the willingness of such people to come forward to offer themselves to carry out the contracts will depend, to some extent, on the issues aired in the contribution of the hon. Member for Weston-super-Mare. Those included the structure of the contracts and their length of time, as well as—I do not think that this point has been raised and I wonder whether the Minister could address it, given that we are talking about contracts—the extent to which he sees contracts focusing specifically on job and other outcomes related to different stages in the process, and how organisations dealing with people requiring assistance for a very long time will get paid for carrying out that work.

I have visited a number of organisations in the private and voluntary sectors carrying out the sorts of functions that we are debating and I have observed that those with a number of funding sources and contacts with a number of organisations have a great deal more flexibility in carrying out their functions and therefore, in many cases, get better results than those subject to a single contact with the DWP, which lays down very specific and often quite onerous obligations. That limits the freedom of action for the private and voluntary sectors to contribute.

In the Minister’s remarks on an earlier amendment, he rightly made the point that the Government wish to capture the innovation, imagination and dynamism of many of the best private and voluntary sector providers. It is important therefore, in order to encourage the best people to come forward and deliver the services, that the contracts are structured in a way that allows that spirit of innovation and imagination to flourish and does not restrict it through specific obligations in the contracts. That is an additional point to the one made earlier.

I was interested also in the points that the hon. Member for Weston-super-Mare made on prime contractors and subcontracting. That is particularly important because, in many communities, local organisations are best placed to deliver such services, rather than the generic national providers who might move into an area. I hope that the Minister will say something about how those who are best qualified for the work will be encouraged through the subcontracting process and about the steps that he will take to ensure that smaller organisations with the expertise referred to in the amendment will come forward to take part.

Adam Afriyie (Windsor, Conservative)

Does the hon. Gentleman share my concern that, as well as competition for provision of services to claimants, there will be competition in the market for suitably qualified staff? Does he share my concern also that staff might be poached from Jobcentre Plus to work in the voluntary and private sectors, which could create additional pressures on the system?

Danny Alexander (Shadow Minister and Disability Spokesperson, Work & Pensions; Inverness, Nairn, Badenoch & Strathspey, Liberal Democrat)

This debate elicits some remarkable comments and I think that that counts as one of them. The hon. Gentleman, who sits on the Conservative Benches, seems very concerned about the implications of competition. Although an unanticipated intervention, it is welcome because it was an important point. Of course, it is important that an individual can work for any organisation and if a better job turns up, they should be free to apply for it. Indeed, if a private or voluntary organisation is delivering services more effectively than Jobcentre Plus, I hope that the best people would go and work for that organisation, rather than for Jobcentre Plus. I hope that the contracting methodology would allow the Minister or the Department to look at Jobcentre Plus-led areas to determine whether it is doing the job properly and ask whether we wish to use the powers in the clause to invite private and voluntary sector organisations to come forward if we think that they might do a better job.

Adam Afriyie (Windsor, Conservative)

There is absolutely no question about that; people should be free to work where they choose. However, let us say that Jobcentre Plus is offering better terms and conditions than the voluntary sector, which begins to lose staff to Jobcentre Plus because of an uneven playing field in the recruitment and terms and conditions market due to the former’s greater resources. That is my concern. In the set-up phase of a national roll-out, there would be concern about staff movement. Will they move so quickly that services to claimants, about whom we care, are affected?

Danny Alexander (Shadow Minister and Disability Spokesperson, Work & Pensions; Inverness, Nairn, Badenoch & Strathspey, Liberal Democrat)

I am grateful for that intervention and, with your indulgence, Mr. Amess, it is a point worth developing. I have visited a number of private and voluntary sector organisations and also Jobcentre Plus, and it is not my experience that Jobcentre Plus offers more advantageous terms and conditions for personal advisers than, for example, private and voluntary sector providers. In fact, I think that is not usually the case. [Interruption.] I think that the hon. Member for Daventry says from a sedentary position that £12,000 a year is the starting salary for a personal adviser. Perhaps the Minister can confirm if that is correct.

Tim Boswell (Shadow Minister, Work & Pensions; Daventry, Conservative)

I was muttering that and I am glad that the hon. Gentleman has brought that point to the attention of the Committee. Does he not agree that it would advance the sum of our deliberations if we slightly got away from the model in which everything was absolutely in the public sector or absolutely in the private sector by conceding that it is perfectly possible within the existing business model for Jobcentre Plus in its pathways or their derivatives to incorporate large chunks of private sector expertise and even private sector activity within its overall framework. Conversely, there may be occasions where the private contractor needs to buy in to the specialist services available in the public service—for example, NHS occupational therapists.

Danny Alexander (Shadow Minister and Disability Spokesperson, Work & Pensions; Inverness, Nairn, Badenoch & Strathspey, Liberal Democrat)

The hon. Gentleman makes the good point that the mix may be different in different areas, according to individual circumstances. That is a very important point and I hope it is one the Minister will reflect on in his remarks. I suspect, however, that the hon. Member for Daventry may, in his characteristic fashion, have expressed a view that the Minister might himself have chosen to express.

I hope that the Minister will deal with the question of subcontracting as that is also an important point. It is important to spell out to what extent multiple organisations might be involved in a particular part of the country and whether individual claimants might have a degree of choice about where they go. In employment zones, there has been piloting of multiple provider areas as well as single provider areas. The intention behind this amendment is to get the best-trained people to deal with individuals according to their individual health condition or impairment. Given the vast range of particular circumstances that we are talking about, I would welcome more information from the Minister about the Government’s intentions in view of the fact that claimants might be able to choose which provider is best able to meet their requirements.

Adam Afriyie (Windsor, Conservative)

Clause 15 is to be welcomed as it provides a mixed provision of service to claimants who have not been that well served in the past. The Bill is to be welcomed as it is a fairly bold one and it certainly shifts the balance of rights and responsibilities.

Clause 15 authorises the Secretary of State to outsource, to delegate and to authorise other third parties to provide services on the Secretary of State’s behalf, such as work-focused interviews, pathways action plans and also some decision-making powers. It is a bold clause because it appears that the Government are effectively—I shall use a strong word initially—“privatising” the benefits system. That seems clear. If we do not like the word “privatisation” or the introduction of a private element to the provision of welfare, perhaps we could say the Government are introducing a market for claimants in claiming welfare and getting back to work. This may be slightly more acceptable, but let us be clear that there is a privatising element here and that is part of the Government’s objective.

With markets, with privatisation and with competition comes failure and this is the point that I want to explore. By outsourcing functions the Government must be willing to accept some failure in the market that they are enabling. If, for example, a particular private firm gets into difficulty, it may well be that the firm will fail. Perhaps it is not providing services—

David Amess (Southend West, Conservative)

Order. I am listening very carefully to the hon. Gentleman’s argument, and I know that it is of interest to the Committee. However, I cannot see that it is specifically concerned with the amendment. It seems that we are going on to a clause stand part debate, so would he consider tying his remarks closely to the amendment?

Adam Afriyie (Windsor, Conservative)

I thank you, Mr. Amess, for enabling me to bring my remarks back to the specifics of the clause.

The reason that the issue of competition is relevant to amendment No. 243 is that if there is a requirement on third parties to have properly qualified staff in place, it will impact on their cost base, the type of staff that they employ and the outsourcing contract. However, I will restrict my points more specifically to the amendment.

If the Secretary of State outsources or contracts out his responsibilities, it must surely be right for there to be a requirement on the providers of the services to be appropriately qualified. Using his knowledge and experience of the pathways to work schemes, will the Minister give a few examples of where the Government have learned lessons from those schemes about the qualifications of people employed by voluntary organisations and in the private sector?

Clause 15 also proposes to outsource decision making. The Minister said that it would be difficultor bureaucratically inefficient to keep passing responsibility for decision making on sanctions back to the Secretary of State or the Department. Will he explain why he thinks it will be workable if a third party has decision making on sanctions outsourced to  them? Referring to the Green Paper, on 3 July the Public and Commercial Services Union warned that

“the private and voluntary sector in the provision of public services will mean a step back to a model of pre-war...provision.”

Does the Minister share that view? If not, can he explain why not, based on his experiences of the pathways to work scheme?

My support for the amendment is based on the fact that it is absolutely essential for the welfare of people with mental or physical health conditions that the contracts—the requirements placed on third parties—make it absolutely clear that staff must be properly qualified and skilled in order to make decisions that will make a fundamental difference to the lives of claimants.

Jim Murphy (Minister of State (Work), Department for Work and Pensions; Renfrewshire East, Labour)

Thank you, Mr. Amess. The Committee is indebted to you for allowing a clause stand part debate by proxy, though perhaps the Vice-Chamberlain of Her Majesty's Household, my hon. Friend the Member for Nottingham, East (Mr. Heppell) is less enamoured.

I shall try to make progress on the amendment. However, if it is your wish, Mr. Amess, to allow a clause stand part debate, we can respond to some of the wider points.

I shall address a couple of issues that have arisen on the matter of contracts. The hon. Member for Weston-super-Mare enlightened the Committee in his first substantive contribution to the debate. The experience he gained as a member of the Select Committee on Work and Pensions shone through, showing his knowledge of the issues. Obviously, I will not have time to respond to all his 30 or 40 questions—I have not kept a tally—in the discussion on the amendment or even in a clause stand part debate. Suffice it to say that we have heard the comments from Stephen Bubb and others on contract length. As the hon. Gentleman knows, three-year contracts will be the norm for the pathways to work schemes.

On the capacity of the market, it may be helpful for the Committee to be aware that we currently have more than 1,000 providers contracted with the Department for Work and Pensions; that is the scale of the market. The Committee will be pleased to hear that between 10 and 20 providers have been bidding in each of the areas in which we are rolling out private and voluntary sector-led pathways, which shows dynamism, determination and the capacity of the market to participate in and support such work.

The hon. Member for Inverness, Nairn, Badenoch and Strathspey asked about choice. It is important that people have choice in public services, regardless of their economic background. The question of how further to empower those who are furthest from the levers of power runs through much of our public service reform. As far as I am concerned, that is about how we extend choice into poorer communities and poorer families.

The hon. Member for Weston-super-Mare conveyed some disappointment that a number of contractors lose their contracts. We have had a conversation about Stalin and comments about Marx, although we have not yet mentioned Lenin. I am sure that Conservative Members do not need any lessons in market economy;  its nature is such that we have contracts for a set period. At the end of those contracts, some firms are assessed as not having lived up to the mark: they have not provided the expected outcomes, and they have failed to serve the people whom they were contracted to serve. As a consequence, such firms do not have their contracts renewed.

John Penrose (Weston-Super-Mare, Conservative)

I thank the Minister for his remarks. The point that I was trying to make did not relate to firms that lose their contracts because they fail to live up to expectations; we all accept that that should happen. I was concerned that firms were backing away from contracts because they found them impossible to deliver, not because of the outcomes required, but due to the demanding nature of the bureaucracy and support costs.

Jim Murphy (Minister of State (Work), Department for Work and Pensions; Renfrewshire East, Labour)

That is another fair assessment from the hon. Gentleman, who thus far has joined the Daventry school of probing. Perhaps, by the end of our deliberations, I will think of the hon. Member for Weston-super-Mare in the same way as I do the hon. Member for Daventry. That is meant as a compliment.

I have no evidence of what the hon. Member for Weston-super-Mare suggests. We have learned through the procurement process. The roll-out of pathways is a black box, as we would term it in the market sense, allowing flexibility for providers to suggest innovations that are most appropriate to the customers and the area that they support. I reassure him that performance information will be reviewed monthly by the contract manager. The first review must take place within26 weeks of the start of the contract, at which point we will identify any problems with support for customers as the contracts roll out.

It might be helpful to make available on the Department for Work and Pensions website some of the documentation regarding contracting, as long as it is not commercially confidential. The answers to a lot of the questions that have been asked are contained in that documentation; it includes information about the contracts sent to potential private and voluntary sector providers, specifically on protection for customers and the approach of those providers.

I accept that I am the only person with a copy of the documentation, so other members of the Committee are at a slight disadvantage. Private and voluntary sector organisations have been sent the documents; they are the basis on which organisations are applying for contracts.

David Ruffley (Shadow Minister, Work & Pensions; Bury St Edmunds, Conservative)

I do not wish to interrupt the Minister’s flow. Will he clarify how widely available the documents will be? He is reading into the record elements of them, so will it be possible to have copies placed in the Library?

Jim Murphy (Minister of State (Work), Department for Work and Pensions; Renfrewshire East, Labour)

I hope to place the documents on the internet, and putting them in the Library would be much less ambitious. That is what I intend to do, on the basis that they are not commercially confidential.

An organisation would have to be accredited, and page 13 of the invitation to tender pack details the necessary compliance with statutory requirements, including the Disability Discrimination Act 1995, and with equality and diversity requirements, and the need for financial viability.

Jeremy Hunt (Shadow Minister (the Disabled), Work & Pensions; South West Surrey, Conservative)

As the Minister has one of the contracts in his hand, will he tell us the length of its period? That is important for private and voluntary sector providers.

Jim Murphy (Minister of State (Work), Department for Work and Pensions; Renfrewshire East, Labour)

I am sure that the Committee will thank me for not reading out all the documentation, but the contracts will be for three years with the opportunity to run for longer. I mentioned that in response to the hon. Member for Weston-super-Mare, but I am happy to say it a second time to the hon. Member for South-West Surrey.

On protections and staff training, the necessary level of support is made clear in the method statementfor private and voluntary sector organisations. The documentation clearly sets out that providers must show evidence of being able to address the specific needs and barriers of all customers. hat is important to bear in mind when discussing the ability of people in the support group to volunteer. On human resources under the pathways initiative, the same documentation makes it clear that those who wish to bid must state their

“existing and additional staffing requirements”,

including staff of their partners and sub-contractors. That is important. They must also attach job titles and descriptions of the qualifications and experience required for each post. The form also states a requirement to

“provide details of your training arrangements, both for new and for existing staff”

to deliver pathways and to

“describe your contingency plans for dealing with fluctuating customer numbers and staff turnover/absences.”

I shall not go through the whole process, but the issues in question are covered in great detail in the contract, under which 10 to 20 organisations in each area are considering offering services.

John Penrose (Weston-Super-Mare, Conservative)

On ensuring a level playing field between private sector, third sector and public sector organisations, are those requirements also levelled at other organisations—for instance, if a particular sector of the Department bids? Does such an organisation have to go through the same bureaucratic hoops to ensure that it is of sufficient quality, or is that assumed to be a fact?

Jim Murphy (Minister of State (Work), Department for Work and Pensions; Renfrewshire East, Labour)

I was not in this role at the start of the roll-out of pathways, but there was no private sector comparator in the challenge function, so no comparison could be made between public sector-led pathways and an alternative. However, I am certain that there was a challenge function involving the Department, lobby organisations, Parliament and Select Committees, as has been the case throughout the process, to see what more we could get from the public sector provision of pathways. It would have been in a different format, because such a contract would not have been signed between the Department and Jobcentre Plus, but there would have been a challenge function and an accountability function.

I hope that my remarks have been tightly linked to the amendment. Many other comments have been on  much wider points. There are protections and challenges in the documentation on contracts. As long as there is no issue of commercial confidentiality, I would be happy to place the documentation in the Library and on the Department’s website.

Amendment No. 243 would put in regulation something that will happen through contracts and contract management. To include the need to adjust the training qualifications, skills and approach of every private or voluntary sector provider would be bureaucratic and inflexible, and it would not enable us to adjust to changing customer needs and the evolution of the welfare market. I hope that I can reassure the hon. Gentleman that as a result of our contracting and procurement process, the amendment is unnecessary. The documentation that I will provide will ensure that his legitimate and well-intentioned concerns will be met. It is unnecessary to be as prescriptive as he suggests by placing such a requirement in the Bill.

David Ruffley (Shadow Minister, Work & Pensions; Bury St Edmunds, Conservative)

Before I allow my hon. Friend the Member for Weston-super-Mare to wind up for the Conservatives, I must say that although I am grateful for the Minister’s undertakings, I am puzzled by his reference to what he has published on the website.The safeguards that he discusses do not need to be in the Bill if they are publicly available. I have had the advantage of conferring with the hon. Member for Inverness, Nairn, Badenoch and Strathspey, the spokesman for the Liberal Democrats, who suggested to me a few minutes ago that they were not aware that there had been publications on the website, and my team would confirm such a view.

The Opposition parties might have been saved a bit of time if answers had been given to our questions about the safeguards. The Minister assures us that they are in the documentation from which he was reading and which he will place in the Library. In the interests of transparency, it is important to know when the documentation was made publicly available, and, in particular, whether what has been on the web and will be placed in the Library is a full, unexpurgated version.

I say that for one particular reason. I do not doubt the Minister’s bona fides, but the Liberal Democrats and I have been the victims of a lack of transparency from another part of his Department in respect of Post Office card accounts. It took considerable effort, involving references to “Erskine May”, Back Benchers piling in and much else, to get the original POCA contract, dated 2003, placed in the Library. That was the subject of much controversy, and there were removals and excisions the first time the documentation was put in the Library. The Minister has tried to be helpful, but when did the information go on the web and is it a full and unexpurgated version of the contractual documentation?

Jim Murphy (Minister of State (Work), Department for Work and Pensions; Renfrewshire East, Labour)

I do not know whether my accent is causing difficulties today. It has not changed from last week; if anything it has become even softer—another couple of days in London does that to a Glaswegian accent. The hon. Gentleman said that he had the advantage of conferring with the spokesman for the Liberal Democrats, which is an unusual phrase for a  Conservative Front-Bench spokesman to use. I said, as I am sure the record will show, that I “would” place—not I “had” placed—the documentation on the DWP website and, by extension, in the House of Commons Library. As some of it might be commercially confidential, I will ensure that I give clear guidance to Committee members at the time of publication as to whether or not it has been published in full. The caveat is commercial confidentiality.

I think that the hon. Gentleman would accept that that is a reasonable approach, because the alternative would have been to say, “Don’t worry. It has all been taken care of. It is all in the contracts.” I seek to continue the tone that we have had in this Committee. Therefore, if it is possible, notwithstanding commercial confidentiality, we will publish all the documentation on the website, and therefore in the Library, to enable a continuing conversation on the types of things about which Opposition Members, and my hon. Friends, have concerns, wish to probe and wish to be reassured. That is entirely reasonable; it is the proper way to proceed.

John Penrose (Weston-Super-Mare, Conservative)

I thank the Minister for his reply, which contained a series of things that reassured many Conservative Committee members, particularly the reference that he twice made to three-year contracts. He also mentioned that there seems to have been adequate capacity so far in terms of the number of organisations bidding for each contract. As the expansion of contracting continues—it is inherent in the notion of rolling out the pathways project with contracting out—we will have to wait to see whether, as we hope, there will be sufficient capacity in future. Whatever has been achieved so far in expanding the capacity of service providers will need to continue on quite some scale if he is to continue to enjoy 10 or 20 offers for each tender.

I was particularly encouraged by the Minister’s use of the phrase “black box” when talking about creating and encouraging innovation. If the Department is no longer specifying the required process and activities, but the outcomes, which I think is what he was driving at—he is nodding—I am particularly reassured because it answers many of the criticisms made in the past year. I was encouraged to hear also that there will be regular reviews of the performance of each organisation during the contract term.

Probably the best news and the thing that is most reassuring, which will lead us to withdraw the amendment, was the Minister’s promise to put copies of the contract out for public view, within the limits of commercial confidentiality. That is important because it will allow us to see the progress made so far in instilling new commissioning skills in his Department. I hope, pray and expect that that skills growth will continue and that the contracts will be improved and refined still further. I beg to ask leave to withdraw the amendment.

John Penrose (Weston-Super-Mare, Conservative)

I beg to move amendment No. 262, in clause 15, page 12, line 44, leave out paragraph (b).

This is a straightforward probing amendment to ascertain how far the contracting-out process might go. In the debate on the preceding amendment, we talked  about a number of different services being provided, but one of the key and ultimately core decisions that must be taken is the gateway decision for access to the benefit itself. That is probably one of the most difficult and ticklish things if the Government do intend to outsource, although I suspect that it is probably one of the last things they would get to—they would want to outsource a lot of other easier things first.

We want to ascertain how far the Government intend to go in outsourcing and whether they genuinely intend to outsource all or part of the gateway decision-making process. We have discussed the way in which the decision-making process is going to alter, and people’s benefits might be sanctioned during work-focused interviews and in other parts of the new arrangements. However, it is important to understand exactly which bits of the decision will come to rest where, because at the moment there is somebody called a decision maker in most Jobcentre Plus offices. Will their job be smaller and split up? If so, who will do it in the future?

Paragraph 99 of the explanatory notes on clause 15 states:

“Subsection (2)...would allow private and voluntary providers to take responsibility for related decision-making activity regarding sanctions and safeguards.”

We would like some more detail on that. I shall give examples of what might be meant by that, some of which would cause us concern and some not.

If the decision-making authority was outsourced to the same person undertaking work-focused interviews, that person would be involved with the client in helping them to get closer to the employment market. He would also have the power to sanction that client’s benefit. It would be potentially difficult and dangerous to make that delicate relationship work for a couple of reasons if the client knows, as he sits in his work-focused interview, that the person interviewing and supposedly helping him can ultimately say,“I intend to sanction your benefit. That is my decision and that is it.” First, we all hope and expect that the frequency of sanctioning will be very low and that it will not happen often. The probability is that sanctions will be discussed only when the relationship between the person running the work-focused interviews and providing the service and the client has degraded and probably broken down badly. In that case, we would be asking that person, in sanctioning a person’s benefit, to be both judge and jury in a case that they are part of already. I think that that is dangerous and potentially leaves the way open to both injustice and appeals against such decisions.

Secondly, and equally dangerously, that situation would create a problem, because if the client talks to someone who is supposed to help them get closer to the world of work, and they know that that person may decide to sanction their benefit, it will be difficult to create the right relationship of trust and support, which has been an essential plank of the pathways pilots, making them so productive and effectivethus far.

Tim Boswell (Shadow Minister, Work & Pensions; Daventry, Conservative)

Does my hon. Friend agree that there is a world of difference between a large Department, which has established protocols and draws a distinction  between a personal adviser and a separate decision maker who could be independent, and a private contractor, who is not bound by those rules and practices, and whose functions may reside in the same person without the necessary transparency? Is that my hon. Friend’s concern?

John Penrose (Weston-Super-Mare, Conservative)

That is precisely my point. We have discussed examples of small local organisations that provide an excellent service. Within them, it will be difficult to separate people who may have decision-making powers from people who may support people as they get closer to work. The crucial question is whether there will be single or dual capacity. In the Government’s contracting decisions, will people be asked to take on sanctioning power and provide services, or will the sanctioning power always be separate from the people who provide services?

It is important to pick up on the point that my hon. Friend the Member for Daventry made. The safeguards for the decision-making, sanctioning power are different from the skills and supportive ambience that one tries to create when offering the services that people need as they get closer to work. For the decision-making power, one needs clarity, transparency, a strong culture and clear guidelines to ensure that decisions are taken correctly. The requirements are different for someone attempting to befriend and support a client who is a long way from work and trying to get closer.

Will there be single or dual capacity? Will a large organisation such as Shaw Trust, Reed in Partnership or WorkDirections, have dual capacity? Parts of their organisations might be involved in sanctions and decision making, and other, separate parts might be involved in delivering contracted services. To what extent will they be contracted out? Will there be Chinese walls between people providing services and people making decisions? Is the whole system a step too far? Do the Government not in fact want to contract out, but keep the ultimate say about a decision in the public sector? Will the contractors merely provide recommendations and factual reports to a public sector decision maker? Those crucial questions must be unpicked and explored in more detail, so that we and the organisations that might bid for the contracts understand what they are asked to sign up to.

Danny Alexander (Shadow Minister and Disability Spokesperson, Work & Pensions; Inverness, Nairn, Badenoch & Strathspey, Liberal Democrat)

I shall follow the remarks of the hon. Member for Weston-super-Mare. The provision is about the potential contracting out of benefit sanctions to third parties who will also be given the power to carry out the welfare-to-work activities and work-focused interviews. This troubles me greatly, and clarification would be useful. It troubles me particularly, because talking to voluntary and private sector providers I have found that they are able to achieve better results than the public sector because of the strength of relationship that they form with their clients, customers or claimants—however we may wish to describe them. In at least some cases, those organisations have a fear—they are being genuine about that—that if the claimant believes, knows and understands that that organisation not only will go about building that relationship positively, carrying out the work and support to enable that person to get into  the labour market and, one hopes, back to work, but potentially has the power directly to sanction that person’s benefits, that could act as an disincentive to the claimant to engage in a positive way with the organisation, as claimants currently do. That may be the brief of some of the providers.

The separation of benefit award and benefit sanctioning power from what I shall call in shorthand the welfare-to-work help has been of great assistance to those private and voluntary organisations to which I have spoken in delivering services. In some cases, those organisations believe that that separation is one of the reasons why their success rates are significantly better than some in the public sector. It is important that the Minister spells out a clear rationale, first of all, for including that power in the Bill. Page 32 of the supporting material, the draft regulations, states:

“The intention behind such a change would be to allow the organisations that come into face to face contact with claimants to conduct the end to end process.”

I can see what is being argued for there from an administrative efficiency point of view, and perhaps that is what the Minister has in mind. However, I would strongly counsel against taking any steps that may help to improve administrative efficiency if there is any risk whatever that they will reduce the outcomes and success rates and reduce the ability of claimants to interact with private and voluntary sector contractors in a way that leads to a greater chance of success. I hope that the Minister can clarify that.

Perhaps the Minister can clarify something else. The draft regulations state:

“We have no current plans to contract out sanctions decision making when ESA is first implemented.”

Given the concerns that I have expressed, the Minister will not be too surprised to know that I welcome that. However, it is important that he spells out in some detail the sorts of circumstances in which he might consider using the power that is contained in the part of the Bill to which the amendment relates. The supporting material also makes the point:

“We will...work with providers to establish whether they would be interested in undertaking this function and whether it would deliver an improvement in efficient service.”

The Minister made it clear in a previous debate that there would be considerable contact with a large number of voluntary and private sector providers in the course of the contracting process. Will he tell the Committee whether any of those organisations have expressed any interest in being given the power of benefit sanction as well as the positive side of the equation? Has anyone expressed an interest in that? Has there been any interest whatever? On the basis of my experience, I would be surprised if many had expressed an interest in carrying out that function. I hope that the Minister will take that as a guide when considering whether he will ever want to implement those powers at all. I look forward to his response on what I consider to be a sensitive part of the clause.

Tim Boswell (Shadow Minister, Work & Pensions; Daventry, Conservative)

Briefly, it is always healthy when a Committee holds its hand up to a Minister and asks, “Are you quite sure that you need these powers? Have you thought them through, and are they fair?” The  concerns that have already been expressed showthe emphasis that Conservative members of the Committee are putting on being fair to the claimant, or meeting the rules of natural justice. I hasten to say that, as a lay person, I do not use that term in a precise context, but the Minister will know what we are all driving at.

There are also some related issues about what I might term the status of public officials, or those who are standing in for public officials, and I shall say a little about that in my brief remarks. Playing my usual trick of anticipating the Minister’s remarks, I think that he will always want to say to the Committee that this is all really exactly the same, and that we are not going to allow it to be anything other than seamless. If for administrative reasons, which are at least arguable, the process is smoother, work-related interviews are not disputed and interview number one by Department for Work and Pensions officials is not different in status from later interviews because that forms an ensemble, I understand the practical case for doing that. I even understand why contractors might want to have control of the whole process and not to feel subverted by officials coming in and taking part of it away from them. On the other hand, it must be done fairly and in accordance with the broad approach to natural justice. In the real world and for the practical reasons that my hon. Friend the Member for Weston-super-Mare adduced, there are concerns about that, not least because the Department has a tradition, it has scope, and access to legal advice and enough officials to adopt different and independent functions to discharge the duties, none of which may be available by custom and practice, or in reality, to smaller or less experienced private contractors.

My first concern about the practical role is the extent to which the Department, if it is inclined to devolve the functions, will be able to instruct and advise decision makers who, under the clause, will still make decisions on behalf of the Secretary of State on the protocol of those decisions to ensure that there is commonality, for example, between the pathways to work area of Jobcentre Plus and the various private contractors doing their own part in the contracted sector. It is important that, at least in practice, they operate in the same way.

I am equally concerned about the redress available to individuals. I understand—perhaps the Minister will confirm this—that the normal nature of social security decisions is that an individual who is aggrieved by a decision made by a public official has the opportunity to have that decision reviewed and, if there is a substantive issue, it may be referred to the social security tribunal. The Minister is nodding at my understanding of that. Equally, if there is an issue of law or the conduct of public officials that goes beyond the individual case—an issue concerning not whether it was right or wrong in the particular case, but whether the Minister or his officials behaved in a way that no reasonable Minister would contemplate, such as if an edict were rebarbative or objectionable—there is ultimately a separate sanction of judicial review. I would like the Minister to tell the Committee that that battery of redress for individuals dealing with Jobcentre Plus or the public sector will be available in the case of private decision making. I hope that he can reassure us on that.

A converse, complex and somewhat ambiguous situation might arise if the Minister when setting his contracts or his officials in the procurement department took on a private contractor and that private contractor in discharging a quasi-public function erred and incurred damages against the Department. Who would pick up those damages? Would the Minister, as the contractor, indemnify an individual who took on a contract as a party to that contract, or would the Government say, “You got it wrong and it is your fault, so you pay for it.”? If so, would that constitute a deterrent?

That is a theoretical point, but it shows that we are moving into deep waters: people with particular expertise in alcoholism, mental health or whatever who are pleased to be called in by the Department to help with a particular function might suddenly find themselves in the middle of a legal maelstrom about whether they conducted sanctioning functions on behalf of the Department. That worries all of us and I shall not go on about it.

The Minister must consider two specific points inherent in the position of a decision maker in the public sector if that is to be devolved outside. One is in relation to the new disability duty which will bite on public authorities in just over a month’s time. Will contractors be bound by those provisions when carrying out their contracts more generally, let alone when there is any dispute about their contract? They are not in the public sector. They may be receiving money from the public sector, but what is their status in relation to the disability duty?

Linked to that is my second concern in relationto the human rights legislation. For example, notwithstanding the fact that many of its residents are being paid for at the public expense, if a care home is run by a private contractor rather than the local authority, the obligations under the Human Rights Act 1998 and the disability duty obligations do not currently apply. The Minister should clarify whether contractors buying into this process would be so bound by their contracts. If they would not, the defences both in law and in practice available to the individual claimant would be lower in status or less well protected than those within a conventional pathways situation.

I fully understand that this is not a situation that is likely to arise often in practice. Nor is it the Minister’s intention to create a two-tier economy. Neither he nor any of us want that or to resile from the principle of sensible contractorisation. That is not the issue. But we need to be assured that the defences are equivalent and that this has been properly considered. We certainly need to be clear about that before any move towards the implementation of these detailed provisions is made.

Wayne David (Caerphilly, Labour)

I apologise to the Committee for not being here for the earlier part of the discussion. I wanted to raise an issue that is pertinent to the point that has been made, but is also relevant to the clause generally. It is the issue of contracts and subcontracting. There is some concern about whether the legislation allows for a private and voluntary contractor to put forward a bid and to  include in that bid some subcontracting to other organisations. If so, how will that be assessed by the Department? Alternatively, if a bid put in by a private or voluntary organisation was accepted and the contract was signed, and then during the course of implementation of that contract it was found that to fulfil the criteria it was necessary to subcontract and bring in other organisations, would the Department allow that and if so how would it assess the matter?

David Ruffley (Shadow Minister, Work & Pensions; Bury St Edmunds, Conservative)

I endorse what my hon. Friends have said. I wish to be absolutely clear about the thrust of the amendment. It deletes subsection (2)(b) because we are not quite sure what it is doing there. If my cross-referencing of the legislation to section 8(1)(c) of the Social Security Act 1998 is correct—

Jim Murphy (Minister of State (Work), Department for Work and Pensions; Renfrewshire East, Labour)

Congratulations.

David Ruffley (Shadow Minister, Work & Pensions; Bury St Edmunds, Conservative)

The Minister congratulates me, but I was rather disappointed not to find in the explanatory notes a description of what 8(1)(c) is about. It is not really surprising that they do not tell us that because it is essentially about subcontracting. It is not about WFIs or service provision but about something fundamental to the British welfare state—the decision-making power and the power to sanction that is currently in the hands of Jobcentre Plus. It is not in the hands of anybody else.

Why is the Minister contemplating that? Not many outside bodies in the private and voluntary sector have any interest in taking over the decision-making function. For example, the Royal National Institute for Deaf People told the Select Committee in evidence earlier this year:

“We would be reluctant to involve ourselves in regulating benefit, and we do not see that as part of our job.”

Examples are legion of private and voluntary sector bodies saying that they do not want to touch sanctioning with a bargepole. They do not want the decision-making role anywhere near them.

Adam Afriyie (Windsor, Conservative)

It seems to me that that is a big difference between pathways to work, with the delegated powers that were given during the project, which was successful on many levels, and the new scheme that is proposed under the Bill.

David Ruffley (Shadow Minister, Work & Pensions; Bury St Edmunds, Conservative)

My hon. Friend is right. Mr. Chris Melvin of the Employment Related Services Association has reminded us that in employment zones private sector providers have the power to pay benefit. However, the Minister cannot therefore tell us, “This is happening in employment zones”. It is not, because there is a massive difference between the paying of benefit, as happens in employment zones, and the sanctioning power. Mr. Melvin gave evidence to the Select Committee on behalf of ERSA and said:

“If they”—

the customers in employment zones—

“are not engaging it is our responsibility to put together a case for decision making and appeals to then decide whether they have breached their benefit regulations. We”—

the private sector providers in employment zones—

“are not doing the sanctioning there. It is decision making and appeals”

that are doing it.

“All we are doing is providing that body with the evidence that they require in order to make their decision.”

That is the state of play so far and that is why the power that our probing amendment would delete is ground-breaking.

As to the merits of the idea of contracting the function to the private and voluntary sector at some future date, should the Secretary of State exercise the power, I am—when I say that I have an open mind—staggered that Ministers even contemplate it. So I should be most grateful for the Minister’s specific answer to my question about how the power is likely to be used.

Finally—I do not mean this in a partisan way—[Interruption.] The Minister knows that I am an honest seeker after truth in this Committee, as elsewhere. Has he had any representations from any public sector union about what the clause might mean? If one wanted to speculate, one might think that the power was a precursor to the breaking up of Jobcentre Plus. If the Minister wants to deny that, I shall be happy to hear the denial. Why else, however, should the power be in the Bill? Why, in short, give any future Secretary of State, whoever that might be, the power to contract out the decision-making function?

Jim Murphy (Minister of State (Work), Department for Work and Pensions; Renfrewshire East, Labour)

Thank you, Mr. Amess, for another broad debate on this narrow amendment. Of course you will guide us if I wander on to the subject of the Disability Discrimination Act 2005, which is a discussion for a future amendment.

I want to set out the position clearly for the Committee this afternoon. The power taken under the clause is about dealing with the possibility that in future it may become desirable to move the decision-making function closer to the front line and into the organisations that deal with customers daily, particularly as we extend work-related activity and conditionality. Allowing providers to undertake the end-to-end process, to which I have alluded, would make the decision making more efficient and would help link rights and responsibilities much more closely in the minds of customers and others. It is therefore important that we have the option in the Bill. It is not an option or a policy that we currently intend to implement. We think that as employment and support allowance, work-focused interviews and work-related activity evolve, and we successfully roll out the private and voluntary sector provision of pathways, the power may be a useful additional measure.

Tim Boswell (Shadow Minister, Work & Pensions; Daventry, Conservative)

Can the Minister solve something that is puzzling me? When we last met, he declined my freely-made offer of greater flexibility in the sanctions for those who did not turn up. Now he wants to take powers, when all Conservative Committee members have expressed considerable concerns about the propriety of devolving such powers to the public sector, while reassuring the Committee that he does not need to use them.

Jim Murphy (Minister of State (Work), Department for Work and Pensions; Renfrewshire East, Labour)

I am trying to set out accurately what we seek to achieve. The hon. Gentleman is right thatwe did not want his blank cheque of taking either passports or driving licences, or the suggestion made by the hon. Member for Windsor of compelling customers to undertake medical treatment. Such was the conversation last Thursday. We did not wish to take those powers.

We seek to identify where, as we successfully roll out the private and voluntary sector provision of pathways, the decision maker should physically be located. I should just say a word or two more on that. As I did in the supporting information that was sent to Committee members, I make it clear that decision making leading to sanctions would not be contracted out at the point of the ESA’s implementation in 2008. It is prudent to allow the successful roll-out of pathways and to allow the ESA to be thoroughly embedded before we embark on further changes and to take time to consult with providers and others to ensure that, should we contract out decision making, it is done properly and with the support of stakeholders.

I can make other clear commitments in respect of the points raised by Conservative Members and by my hon. Friend the Member for Caerphilly (Mr. David). We will go into the specific point about the Disability Discrimination Act in more detail later. In the invitation to tender and the contracting process, the private and voluntary sector will operate on behalf of the Secretary of State, so the responsibility of adhering to that Act is clear. It will be the responsibility of the primary contractors to ensure that subcontractors adhere to their statutory responsibility in respect of that Act. Failure to adhere could, in some instances, lead to the termination of contracts.

Danny Alexander (Shadow Minister and Disability Spokesperson, Work & Pensions; Inverness, Nairn, Badenoch & Strathspey, Liberal Democrat)

It appears from the Minister’s remarks that he has moved on from describing the rationale behind the taking of this power. I want to probe him on it one further time. He mentioned that the Government might want to take this power in future but that they did not intend to do so now.For the Committee’s benefit, will he describe the circumstances in which he envisages that the Government would take the power?

Jim Murphy (Minister of State (Work), Department for Work and Pensions; Renfrewshire East, Labour)

The reason why I went off at that little tangent was that I caught sight of my hon. Friend the Member for Caerphilly out of the corner of my eye and thought that it would be good manners to respond to his point at that moment. On the specific questions that have been raised—

Tim Boswell (Shadow Minister, Work & Pensions; Daventry, Conservative)

I may have misheard the Minister, but I understood that he just said that, without prejudice to the decision-making power, any activity by contractors in relation to the Bill would be covered by the Disability Discrimination Act and the Human Rights Act. He went on to say that any subcontractors would be bound by their contract also to fulfil those obligations. Will he confirm that understanding of mine? I do not want to confuse the issue in respect of the decision making, but would contractors be carrying out a public function and would they be bound by those two bits of legislation?

Jim Murphy (Minister of State (Work), Department for Work and Pensions; Renfrewshire East, Labour)

I provided that confirmation just a moment ago and in an earlier debate on where responsibility for enforcing the DDA lies. I do not wish to tempt your patience, Mr. Amess—this relates to the next amendment—but private and voluntary sector organisations could act on the Secretary of State’s behalf and those contractors would have to adhere to the DDA. Subcontractors would be held to account by the primary contractors should they fail to comply with the DDA. Primary contractors would be held responsible by the Secretary of State for their adherence to the DDA and for that of the subcontractors to their statutory requirements. It would be a matter between the Secretary of State and the prime contractors.

I am going to try and make some progress because we said at the start of proceedings that that is what we would do. There are issues around whether it would be appropriate to contract out certain responsibilities; in no scenario would we wish to contract out responsibility for decisions made under clauses 8 and 9 regarding limited capability for work and limited capability for work-related activity, which would remain the responsibility of Jobcentre Plus. We have debated that already.

Jobcentre Plus would also retain the responsibility for the first work-focused interview at eight weeks and we would not wish to subcontract that out to the private and voluntary sectors, although there was a legitimate debate about whether that should happen. We settled on the view that Jobcentre Plus should retain that work-focused interview. Furthermore, although the return-to-work credit is not strictly a benefit, it is part of the package, and we would not seek to contract it out.

Those are some important circumstances in which we would not wish to apply the powers in the clause. Some have suggested that the provisions are a precursor to further changes to Jobcentre Plus. The Public and Commercial Services Union, which represents Jobcentre Plus, is a highly effective and professional organisation that carries out its work on behalf of its members effectively, as it is entitled to do. However, not even it has put on the record anything that goes as far as what the hon. Member for BurySt. Edmunds suggested, which is that the power in the clause is a precursor to the break-up of Jobcentre Plus. As I have said already, the responsibility for the first work-focused interview and payment of return-to-work credit will be with Jobcentre Plus.

David Ruffley (Shadow Minister, Work & Pensions; Bury St Edmunds, Conservative)

I do not think that anyone is disputing the fact that some parts of the Bill relating to the roll-out of pathways and beyond will not be susceptible to subcontracting.

Returning to the amendment before us, will the Minister tell us whether a

“function conferred or imposed on the Secretary of State by virtue of the application in relation to such regulations of section 8(1)(c) of the Social Security Act 1998”

is a function of decision making? If so, in what possible circumstances would he consider contracting out that decision-making function? My question is not about anything except the decision-making role.

Jim Murphy (Minister of State (Work), Department for Work and Pensions; Renfrewshire East, Labour)

I shall seek to respond to the hon. Gentleman’s point.

On the responsibility for the decision making, the power in the clause will not change the role of a personal adviser. Opposition Members have spoken eloquently and effectively on the nature of the trust in the relationship between the personal adviser and the customer. Sanctions have been tested in the Jobcentre Plus-led pathways. In those cases, personal advisers can say whether customers, whom they meet on a regular basis, have fulfilled their obligations. If a personal adviser feels that the customer has not met his or her responsibility, the personal adviser can refer the case to a decision maker. We are discussing the location of the decision maker, not the relationship, responsibility or skills of the personal adviser.

John Penrose (Weston-Super-Mare, Conservative)

Is the Minister therefore saying that we should have a dual-capacity model—in other words, that the personal adviser, contracted out or not, should not be the decision maker but should make a recommendation to somebody else? Should that somebody else be in the same organisation or an entirely separate one?

Jim Murphy (Minister of State (Work), Department for Work and Pensions; Renfrewshire East, Labour)

The hon. Gentleman’s question is entirely fair. Our intention is that the personal adviser will not be doing the sanctioning under any feasible roll-out of the power contained in the clause. He will remain a personal adviser and will not become the decision maker. I know that the hon. Gentleman is following this, because he has great knowledge of the details. The power in the clause will potentially move a decision to a private or voluntary sector organisation—not to the same person, but to the same organisation. As we consult with stakeholders, the private and voluntary sector, Parliament and others on how that can feasibly be delivered, we will seek to structure a system whereby there is a clear separation of the personal adviser and the decision maker. I apologise to hon. Members if they got the impression that we were trying to expand the personal adviser into a quasi-personal adviser/decision maker. We are seeking to maintain the system under the Jobcentre Plus-led pathways whereby a personal adviser makes an assessment and refers it to a decision maker, who makes a judgment. That is the model that the power in clause 15 is intended to create.

Tim Boswell (Shadow Minister, Work & Pensions; Daventry, Conservative)

Will the Minister also confirm that no clause in the contract with a private sector contractor will be likely to influence either the recommendations of a personal adviser or the decision of a decision maker? It troubles me slightly to think that there might be a performance situation whereby a decision taken by a private sector organisation might be distorted bythe terms of the contract that it holds with the Department.

Jim Murphy (Minister of State (Work), Department for Work and Pensions; Renfrewshire East, Labour)

I can give some relief to the hon. Gentleman by saying that we will not incentivise private and voluntary sector organisations to sanction anyone. We will not provide a financial incentive framework that would make it in an organisation’s interests to do so.

Jeremy Hunt (Shadow Minister (the Disabled), Work & Pensions; South West Surrey, Conservative)

Following on from the point about financial incentives, the concern expressed by private and voluntary sector organisations to us, and I am sure to Ministers, is that it is fundamentally against their ethos to be judges. They want to support and help someone who is trying to engage in the world of work. If they have to take on the role of administering sanctions, it will be a fundamentally different role. Will the Minister confirm that the Government will not use the contracts, through which they will exercise considerable power over the actions of private and voluntary sector providers, to make it impossible for private and voluntary sector providers to say that they do not wish to be involved in the administration of sanctions?

Jim Murphy (Minister of State (Work), Department for Work and Pensions; Renfrewshire East, Labour)

Even in the scenario empowered by clause 15, the private and voluntary sector will not be administering sanctions. Sanctions will be related to the payment of benefit, which is in the public sector. The location of a decision maker will change. To be fair to Opposition Members, I do not believe that even in their darkest days they would have sought to set targets for sanctions on the customers whom we are considering.

Danny Alexander (Shadow Minister and Disability Spokesperson, Work & Pensions; Inverness, Nairn, Badenoch & Strathspey, Liberal Democrat)

I am still a bit confused by the Minister’s position. He has set out clear and precise ideas about how the power in the clause will work in practice, but he seems unwilling to tell the Committee anything about the circumstances in which he might seek to use it, which seems odd. Perhaps I am misunderstanding him, or maybe there is more to the matter than meets the eye. Will he tell us more about his intentions? Under what circumstances will Ministers seek to give the private and voluntary sector the power to make decisions about whether someone’s benefit should be sanctioned?

Jim Murphy (Minister of State (Work), Department for Work and Pensions; Renfrewshire East, Labour)

I have already set out the conditions. They are when the ESA is introduced, pathways are introduced nationally and the delivery is successfully embedded, the capacities of the private and voluntary sectors evolve, and after consultation with Parliament, stakeholders and the relevant Select Committees. The conditions are based not on a customer’s medical ailment, but on the successful roll-out of pathways.

The hon. Member for Daventry raised concerns about the protections. If the location of the decision maker were changed, all protections allowed or enabled under Jobcentre Plus would be in place, including appeals to the social security appeals tribunal, and in some cases, to the social security commissioners.

Clause 15 will not be able to apply the functions under clauses 8 and 9. We would consider changing the location of the benefit-entitlement decision maker on the basis of, for example, whether there was adherence to and attendance at work-focused interviews, whether there was good cause for non-attendance and whether someone had fulfilled his or her responsibility in respect of work-related activity.

It is important to retain the power in the Bill for future introduction as welfare provision evolves throughout the country, and as pathways and ESA are successfully implemented. From Opposition Members’ comments and from the nature of our debate today, before introduction, we are aware that we would need to conduct detailed conversation with the private and voluntary sector organisations. Some welcome it: Shaw Trust and Working Links have confirmed that they would be interested in having such responsibility. However, we would need to take part in detailed conversations about contracts and protections as the provisions are introduced. It is important to include the power in the Bill, so that it can be introduced if appropriate in the future.

John Penrose (Weston-Super-Mare, Conservative)

We got there in the end. I think I heard the Minister say that he expects—in the future, not immediately—to contract out the decision-making function to third parties, be they private or third sector organisations, with the strict proviso that there is a clear distinction between the personal adviser role and the decision maker role, and that he intends, in consultation with all stakeholders, to build a high Chinese wall between those functions. That is vital. Now that that is clear, the debate has been revealing, and I am sure that everybody listening will want to return to it.

Adam Afriyie (Windsor, Conservative)

Paragraph (b) represents a large power-grab. Does my hon. Friend agree that even if it were agreed to in Committee, the Lords would identify it as a significant provision whose powers needed to be curtailed?

John Penrose (Weston-Super-Mare, Conservative)

I am sure that my hon. Friend is right. Everybody listening to the debate, in another place and among the public, will want to return to the issue in detail. We will happily withdraw the amendment, but this is a topic that will run and run. I beg to ask leave to withdraw the amendment.

Danny Alexander (Shadow Minister and Disability Spokesperson, Work & Pensions; Inverness, Nairn, Badenoch & Strathspey, Liberal Democrat)

I beg to move amendment No. 160, in clause 15, page 13, line 33, after ‘relates’, insert—

‘(d) shall be subject to the requirements of the Disability Discrimination Act 1995 (c.50) and the Human Rights Act 1998(c.42)’.

I am not sure that I have much time on this one. Many of its points were addressed in the previous debate, but I wish to raise a couple of points in relation to the Human Rights Act and the Disability Discrimination Act.