Local Government (Direct Labour)

Part of the debate – in the House of Commons at 10:43 pm on 18th July 1983.

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Photo of Mr Stuart Holland Mr Stuart Holland , Vauxhall 10:43 pm, 18th July 1983

The Minister addressed the House as if he were informing it. In fact, he has not argued the case at all.

On costs, for example, it is not enough for the hon. Gentleman to say that there will be a 10 per cent. advantage assumed from competition. Will he answer both the points put by my hon. Friend the Member for South Shields (Dr. Clark) in terms of the outturn costs where the private sector overruns and direct labour departments have consistently underrun estimates? How does he answer the fact that the estimated costs for the new requirement of 30 per cent. tendering will be £5·4 million—£4·7 million for England and £0·7 for Wales, resulting in the employment of 398 extra administrative staff—345 in England and 53 in Wales?

That not only amounts to an increase of that very type of white collar staff that Conservatives choose, and are even pleased, to call bureaucracy, but represents about 25 per cent. of the value of work estimated to be transferred to the private sector. What is the point? Where is the 10 per cent.? We are talking about increasing administrative costs by 25 per cent. I am perfectly happy to see some people put back to work, but I would prefer to see them put back either into productive work or into the social sector rather than simply in the scrutiny of work going out in this case to the private sector on terms welcome to the Government Front Bench as the Tory party pays off its friends.

The tragedy is that it is worse than that. Behind the advantage to the property lobby from having access to a larger share of the contracts there is a certain economic philosophy — if here we must give credit to the Government. It is the philosophy of privatisation —precisely what we discussed earlier today in respect of telecommunications. It is the importer conviction of this Government — from Austria through Freidrich von Hayek—that state is bad and private is good. There is a positive crusade to roll back the frontiers of the state and unleash the forces of the private sector. There is no analysis of the internal efficiency of direct labour organisations. No economic audit of them has been undertaken. It may be that at some time in the future we shall be given it, but we have not had it today. It simply implies that the public sector is wasteful and that the private sector is profitable, without recognising the circularity of income generated through public expenditure and passing through direct labour departments.

The Minister was snide about the analysis by the Association of Metropolitan Authorities and the Association of County Councils, but as yet he has not answered their argument. The questionnaire which they put out on these proposals, as they say, makes it difficult to understand the purpose of the regulations at all. Fifty per cent. of all highways work is already carried out by the private sector. Obviously, direct labour organisations have a greater relevance to the smaller jobs, but even there 25 per cent. of all jobs under £50,000 are carried out by the private sector. When one takes into account that very nearly half the value of work carried out by the DLO actually finds its way into the private sector through the purchase of materials … and plant hire, the actual scope of the private sector is further increased. It is called the multiplier effect. It is a simple fact that public spending generates income and revenue in the rest of the economy.

The Minister may find this puzzling. But I am not sure. I think that he is embarrassed to have to stand at the Dispatch Box and read out all this garbage without believing it. The hon. Gentleman is really quite intelligent. Unlike some of his right hon. and hon. Friends, he understands Keynesian economics and public expenditure rather than simply assuming that it is a load of nonsense.

Unfortunately, the Chancellor of the Exchequer does not appear to have the same understanding. I put a parliamentary question to the right hon. Gentleman last week asking what estimates had been made of the income-generating effect in the private sector of public spending. I got the bland reply, which I had half expected, that the Government did not undertake such estimates. Of course they do not undertake them. If they did, they would knock a hole through the philosophy of privatisation. If they had to start estimating the generation of income in the private sector from public spending through public enterprise agencies and municipal agencies such as direct labour departments, they would undermine the basis on which they are seeking to roll back the frontiers of the state, Ronald Reagan-style.

There is a case in point in council housing, and the pressure to give the private sector elbow room and take the burden of the state off the private sector. The facts are that direct labour departments in Scotland in recent years have been responsible for only 3 per cent. of council house construction, direct labour departments in England and Wales for only 7 per cent. and direct labour departments in the Greater London area for only 13 per cent. Does that mean that they are dominating the market? Is it really the burden of municipal public enterprise which is responsible for the crisis in the housing sector? It is not. It is the monetarist policies pursued by the Government, the cuts in the housing investment programme and the way in which they have pulled the rug from under the feet of private sector constructors which are responsible for the housing crisis.

Those very Rotarians and little business men were told during the election, as they were in the last, "We will cut your tax burden." They cheered the Prime Minister, forgetting that before the tax burden is reduced the first cuts come in the council house construction sector—the cuts in public spending which by themselves are unemploying those same small business men. It is the small builders, the Rotarians and local Conservative association subscribers, quite apart from the Wimpeys and the Laings, who have been undercut by the Government. They have had high interest rates wrapped around their necks and they have just been given the drop — the equivalent, despite the vote which, in the view of many hon. Members, went the right way last week, of capital punishment.

They have been given the drop by the Government's economic policies. They have been bankrupted by them. That is why they are bringing pressure to bear on the Government. That is why they come along and say that the housing sector is in crisis; they are not making money any more and there is no upturn or light at the end of the tunnel. They ask why the Government do not do something about DLOs; why they cannot have a little of what the DLOs are making in a shrinking market; why the Government do not look after them—their people.

That is the argument behind what the Minister is saying. That is what is behind all his pomp and fantasy about philosophy. The reality is that the Government are serving their bigger friends in highway construction and their smaller friends in the council house building sector by this attack on DLOs.